Bear tracks: Wall Street is on alert for signs that the next bear market may be getting closer. (AP Photo/Galen Rowell, File)
GALEN ROWELL, Associated Press
The broad U.S. stock market is down about 10% from its January high. And that puts it a far ways off from a bear market (a drop of 20% or more).
But dig deeper and it’s clear the Wall Street bear already has ravaged many stocks.
Nearly 1-in-4 companies (22.4%) in the S&P 500 stock index were trading at least 20% below their 52-week highs heading into the last trading day of March, according to FactSet. And that adds up to what Wall Street dubs a “stealth” bear market.
Often, broad indexes such as the market-value-weighted S&P 500 mask the pain beneath the surface. Big, winning stocks often hide the blemishes of the losers, such as General Electric, which is 55% below its April 2017 high. Stocks now in bear market territory include many well-known names: Mattel, FootLocker, Chipotle, Harley-Davidson, UnderArmour, General Motors and UPS.
“If it walks like a duck, or even limps like a duck, then it’s the real thing this stock market decline,” says Chris Rupkey, chief financial economist at MUFG, a financial firm with offices in New York.
“This certainly feels like a bear market for most investors even if it doesn’t meet the technical requirements 100%. Any way you slice and dice the returns, investors are profoundly disappointed in the stock market performance this year, and especially the volatility.”
But not everyone is calling the recent carnage a stealth bear. The market is simply undergoing a shift in which money is being moved out of tech, materials, financials and other parts of the market, says Erik Davidson, chief investment officer at Wells Fargo Private Bank. Investors, he says, have turned defensive and are redeploying cash in real estate, utilities and energy stocks.
“At this point,” says Davidson, “it is probably more of a sector rotation story than a stealth bear market.”
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