Are US stocks in a bull or a bear market? If it’s a bull market, then recent weakness – the S&P 500 fell 10 per cent after three consecutive monthly declines – provides an obvious buying opportunity. If it’s a bear market, last week’s market rebound will be fleeting.
Unfortunately, it’s hard to tell.
In June, many declared the bear market officially over, noting the S&P 500 had rallied over 20 per cent from October 2022′s low. Bulls note that notwithstanding recent weakness, the index never came close to last year’s low. Corrections are normal and healthy, they say, and three consecutive monthly declines are hardly a cause for alarm, given stocks had risen in each of the preceding five months.
True, but there are grounds for concern. A few mega-cap tech stocks have soared this year, but most stocks have gone nowhere.
Creative Planning strategist Charlie Bilello notes the average S&P 500 stock has actually slipped this year, while the small-cap Russell 2000 index is down 5 per cent. “Is this what a new bull market looks like?”, he asks. Similarly, Bespoke Investment notes that while the Nasdaq is up 25 per cent over the past year, it’s down 17 per cent over the past two years.
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Bespoke also argues that counter-trend rallies have been “pathetic” over the last three months, with investors showing no appetite to buy the dips.
That said, stocks showed signs of life last week. Bulls will be hoping to build on the rebound. Otherwise, doubts will grow as to where stocks are headed in 2024.
