It may be premature to start planning for a sustained stock market rally, but it’s never too early to look for perspective on what’s in store for the future.
We’ve been collecting odds and ends that lend a bit of insight into matters cyclical, including the burning question: When will the bear market end? In terms of declines, the current tumble (as of Nov. 20) is the deepest in the post-World War II era, based on the S&P 500,
Before the latest rally, in late November, the year-to-date loss in 2008 for the S&P at one point exceeded even the 43.3% total return selloff of 1931, according to Morningstar’s Ibbotson division. It’s anyone’s guess if we’ll ultimately end up in record negative territory once this year’s final trade prints. Yes, there are only 14 trading sessions left to 2008 after today, and as of last night the S&P 500 was off by less than 40% on a total return basis. Painful, to be sure, but a bit better than the year-to-date loss of 47.7% as of November 20’s close.
Daily Archives: December 4, 2008
SOMETIMES A BLIP IS JUST A BLIP
One blip a trend does not make.
Yes, we’re all eager for any sign of hope on the economic front, and so the slight upturn in our broad measure of the October data looks encouraging. But it’s probably just noise—a refreshing bit of noise from the larger bearish trend, but noise just the same.
We’re talking here of our propriety CS Economic Index, which is an equal-weighted measure of 17 leading, coincident and lagging indicators that track the broad trend in the U.S. economy. Leading indicators make up nearly half of this benchmark’s weight. As our chart below shows, October posted a small rise in the index—the first after four straight monthly declines. (The complete range of monthly economic data for any given month arrives at a lag, and so October’s numbers were only recently complete as of last Friday.)
Alas, it’s not the start of a rebound. A big part of the blip in October can be traced to lower interest rates, which register positively in our index. Normally, lower interest rates dispense a bullish tonic for economic activity now and in the future. Unfortunately, the times are anything but normal. Lower interest rates, although they look encouraging on paper, have lost a fair degree of their stimulative power in the real world at present.