Last week the falls in the Nasdaq, SP600 SmallCap and the FTSE 250 all entered bear market territory, ie price 20% below the all time highs. I see some commentators say they are just going to ride this out, that in the past they`ve just bought high quality stocks, maybe with good dividends, and as long as they do this, they will be fine. But I feel these people are taking risk with their money. I learnt from David Paul that market timing is 70% of the equation when it comes to the movements of stocks and at times like this you certainly see this. Even good stocks get sold in a market crash. Currently the declines from high are just this:
•SP500 -17.5%
•Nasdaq -21.7%
•SP600 Small -25.9%
•FTSE100 -9.6%
•FTSE 250 -24.6%
•FTSE AIM All Share -51.4%
But previous major declines from high in US include this:
•1929-32 -89.2% (DOW)
•2000-2003 Nasdaq -78.6% (similar to 1929 it hasnt happened just once)
•SP500 -50.5%
•2007-9 SP500 -57.7%
•Nasdaq -54.5%
•2020 SP500 -27.5%
Nasdaq -37.7%
So which decline are we in:
•1929- scary part is 1920s rise less than last 10 year rise in Nasdaq. Similarities in roaring twenties narrative and AI narrative recently. Led to protectionist response worldwide in 1930s. But drops last week not 10% per day as in October 1929. Its unlikely (its happened twice in the last century) but we should always be aware of the black swan possibility, and why I just wouldnt stay 100% invested at the moment.
•2000-3 daily declines for SP500 generally greater for last week except for 9/11 in 2001. Again there was the dot com bubble which preceded this, like the recent bubble in US stocks we`ve had.
•2008 daily declines only similar to October 2008 when full blown banking crisis. But bear market was a year old then. Crisis maybe a bit different as it was a banking crisis whilst today`s issue maybe more due to government debt levels.
•2020 similar daily declines, though some in March 2020 were worse. Quite plausible we can have a reversal just as strong as 2020 if Trumps tariffs just a negotiating tactic, and we get interest rate, tax cuts. Though will they work this time.
•Ultimately I don’t know- it maybe nothing like any of these periods. But…
