{"id":51069,"date":"2023-08-21T08:18:48","date_gmt":"2023-08-21T12:18:48","guid":{"rendered":"https:\/\/ifintechworld.com\/investing\/why-the-stock-markets-weakness-doesnt-mean-the-bears-are-in-charge\/"},"modified":"2023-08-21T08:18:51","modified_gmt":"2023-08-21T12:18:51","slug":"why-the-stock-markets-weakness-doesnt-mean-the-bears-are-in-charge","status":"publish","type":"post","link":"https:\/\/ifintechworld.com\/?p=51069","title":{"rendered":"Why the stock market\u2019s weakness doesn\u2019t mean the bears are in charge"},"content":{"rendered":"<div id=\"js-article__body\" itemprop=\"articleBody\" data-sbid=\"WP-MKTW-0002414272\" role=\"document\">\n<p>The death of the bull market in U.S. stocks is exaggerated.<\/p>\n<p>I base this upbeat assessment on a comparison of U.S. market sectors\u2019 recent returns and the regular cycle that they often undergo during bull markets. Some typically do particularly well at the beginning of a bull market, for example, while others shine as bull markets are coming to an end.<\/p>\n<div class=\"paywall\">\n<p>Recent market action doesn\u2019t fit the typical pattern of late-bull-market relative strength: Many of the sectors that normally do the best at the end of bull markets have been laggards, just as many of those that do the worst at the end of the bull markets have instead been stellar.<\/p>\n<p>The last time I used the sector relative strength rankings to grade the market was in early April, more than four months ago. I concluded then that the rankings were more consistent with an emerging new bull market than a correction in a bear market. The S&amp;P 500<br \/>\n        SPX<br \/>\n       rose almost 12% from the date of that column to the late-July high, while the Nasdaq Composite<br \/>\n        COMP<br \/>\n       gained close to 20%.<\/p>\n<p>The accompanying chart shows the trailing three-month returns of the 11 S&amp;P 500 sectors. The arrows that identify the best- and worst-performing sectors at the top of past bull markets are based on a ranking from Ned Davis Research of average returns over the final three months of all bull markets since 1974.<\/p>\n<div data-layout=\"inline\n                \" data-layout-mobile=\"\" class=\"\n          media-object\n          type-InsetMediaIllustration\n            inline\n  article__inset\n          article__inset--type-InsetMediaIllustration\n            article__inset--inline\n  \"><\/p>\n<p>          <!-- eventually when we know what this card will be we can change it and leave this one --><\/p>\n<figure class=\"\n        media-object-image\n        enlarge-image\n        img-inline\n        article__inset__image\n      \" itemscope=\"\" itemtype=\"http:\/\/schema.org\/ImageObject\"><\/p>\n<div style=\"padding-bottom:56.42857142857143%;\" data-subtype=\"photo\" class=\"image-container  responsive-media article__inset__image__image\"><\/div>\n<\/figure><\/div>\n<p>Notice that two of the three sectors that typically perform the worst at the end of bull markets \u2014 Energy and Communication Services \u2014 have recently been among the best performers. And two of the three sectors that normally perform the best at the end of bull markets \u2014 Consumer Staples and Real Estate \u2014 have recently been among the worst performers. None of these rankings is consistent with the historical tendencies for the end of a bull market.<\/p>\n<div data-layout=\"inline\n                \" data-layout-mobile=\"\" class=\"\n          media-object\n          type-InsetPullQuote\n            inline\n    scope-web|mobileapps\n  article__inset\n          article__inset--type-InsetPullQuote\n            article__inset--inline\n  \"><\/p>\n<p>          <!-- eventually when we know what this card will be we can change it and leave this one --><\/p>\n<div class=\"wsj-article-pullquote article__inset__pullquote \">\n<p class=\"pullquote-content article__inset__pullquote__quote\">\n        <span class=\"l-qt article__inset__pullquote__mark--left\">\u201c<\/span> Even if this upbeat forecast of the sector relative strength rankings proves to be accurate, the stock market could still suffer a severe correction. <span class=\"r-qt article__inset__pullquote__mark--right\">\u201d<\/span>\n      <\/p>\n<\/p><\/div>\n<\/p><\/div>\n<p>There are a couple of warning signs. Utilities\u2019 recent market-lagging performance is consistent with a late-stage bull market, as is the market-beating performance of Consumer Discretionary. To put these counterexamples in context, consider the rank correlation coefficient between a ranking of all 11 sectors\u2019 trailing three-month returns and the historical average for the end of bull markets. <\/p>\n<p>This statistic ranges from a theoretical maximum of 1.0 (when the two rankings are identical) to minus 1.0 (when the rankings are perfectly inverse). This rank correlation coefficient currently stands at minus 0.01, meaning that there is no statistically detectable correlation between how the sectors are currently performing and the end of the typical bull market.<\/p>\n<p>Even if this upbeat forecast of the sector relative strength rankings proves to be accurate, the stock market could still suffer a severe correction. In fact, further weakness wouldn\u2019t be surprising, as I wrote earlier this week. That\u2019s when I reported that one leading analyst is predicting that the correction would take between 8% and 13% off the market averages, and so far the S&amp;P 500 is 4% lower than its late-July high.<\/p>\n<p><em>Mark Hulbert is a regular contributor to MarketWatch. His Hulbert Ratings tracks investment newsletters that pay a flat fee to be audited. He can be reached at <\/em><em>mark@hulbertratings.com<\/em><\/p>\n<p><strong>More:<\/strong> Will August\u2019s stock-market stumble turn into a rout? Here\u2019s what to watch, says Fundstrat\u2019s Tom Lee.<\/p>\n<p><strong>Plus:<\/strong> Finally, the answer to whether money buys happiness<\/p>\n<\/p><\/div>\n<\/div>\n<p>Read the full article <a href=\"https:\/\/www.marketwatch.com\/story\/why-the-stock-markets-weakness-doesnt-mean-the-bears-are-in-charge-eb05b28c?mod=investing\" target=\"_blank\" rel=\"noopener\">here<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"<p>The death of the bull market in U.S. stocks is exaggerated. I base this upbeat assessment on a comparison of U.S. market sectors\u2019 recent returns and the regular cycle that they often undergo during bull markets. Some typically do particularly well at the beginning of a bull market, for example, while others shine as bull [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":51070,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"video","meta":{"footnotes":""},"categories":[239],"tags":[83],"class_list":["post-51069","post","type-post","status-publish","format-video","has-post-thumbnail","hentry","category-investing","tag-featured","post_format-post-format-video"],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v20.6 - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>Why the stock market\u2019s weakness doesn\u2019t mean the bears are in charge | iFintechWorld<\/title>\n<meta name=\"description\" content=\"The death of the bull market in U.S. stocks is exaggerated. 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