The S&P 500 in its latest decline returned to the quote it had 13 months ago (in the rectangle the time frame considered).
In the jargon this is called the 52-week decline and has happened only 23 times in the past 72 years.
The top row of this table shows the average index returns 6 months, 1 year, 2 years and 3 years after a "52-week decline."
source: www.stransberryresearch.com
When compared with the bottom row, which shows the overall average index returns, we see that apart from the 1-year range, where the returns are almost equal, for the other time ranges the 52-week decline acts as an anticipator of strong upturns, both medium-term and long-term.
You can't count the "oversold" (I use that term for convenience) signals anymore, both in the crypto and traditional markets. I don't even have time to post them all here.
At some point though, we need to tighten up and try to make some assumptions about the timing.
That is, it's time to start figuring out how much longer this generalized bear market might last.
At the moment, the data do not conform to each other. I mean, depending on the point of observation, we arrive at different assumptions about the timing. I think it is useful to put these various patterns on the table and observe them at one glance.
Let's expand the time space to see if there are good prospects even in the long term (after 3-5 years from now). To do this, we compare all the annualized losses of the index from 1928 to now.
The annualized loss of the S&P 500 is currently 16% (not to be confused with the magnitude of the decline from the year's highs, which is much greater).
In terms of annualized loss, if the year ended today, this would be the seventh worst year for the index since 1928.
Only 1930... 1931... 1937... 1974... 2002... and 2008 had higher annualized losses.
In the following table, we see how the index performed over the long term after having such annualized losses.
source: Legacy Research Group
The table shows very strong increases in the average return (with very few exceptions), 3 and 5 years after each "terrible" year.
On average, over the next 5 years the average return has been over 80 percent, although there are then appreciable variations in specific individual cases.
So even in the long term, the historical data are very encouraging.
Yesterday there were "yield" statements from executives of publicly traded companies, adding to the others that have been released in recent days.
Basically, the retail (retail) and Internet (Internet advertising and services, to be precise) sectors are showing, by the word of their own executives, a deterioration of their economic conditions so fast that analysts are not in time to correct their forecasts.
The fact is that these two sectors are directly related to the spending capacity of Americans and thus denote a drastic reduction in demand that comes to disrupt the whole inflation picture on which the Fed and the markets had settled.
If consumption continues to collapse, then the Fed will soon have to revise its liquidity-reducing policy. Already the first signs of this have been given to us by two Fed components: St. Louis Fed President Bullard (usually a well-known "hawk") and Atlanta Fed President Bostic (go read their respective statements).
The return to the usual accommodative policy perpetrated by the Fed over the past 10 plus years could begin much sooner.
