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Are we really in a bear market?

by Index Investing News
March 6, 2023
in Stocks
Reading Time: 2 mins read
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Linked above is the SP 500 with markers notating peaks and recessions, in its 2001 dot com stock bubble, 2007 financial bubble and the 2021 stock bubble, which are necessary for understanding my reasoning.

Here's my take:
incoming 2nd recession: probable but not soon
bear market: over
stock market: about to take another run up/peak

2 important things of note:
1. While the yield curve inversions have predicted all of the previous recessions (including the brief but not shown covid recession from feb-april 2020) this does not actually line up with the peaks and troughs in the market as seen in my graphs
2. Recession happen in Bear markets (as per definition relying on negative GDP growth), but bear markets can happen without recessions

The 2001 bubble had its peak a just barely before the YC inversion.
The 2007 bubble had its peak a full year after YC inversion.
The 2020 brief 3 month recession was a result of covid lockdowns and therefore not applicable to our current situation.

So looking at our current market we should be aware that the December 2021 peak and following 1 year bear market pull back is probably the sole result of covid tech stocks running up and not the long overdue bear market/recession everyone's been talking about incoming. Of course stock market =/= health of the economy. There are plenty of jobs and growth (both through pop growth and tech development) in the economy right now which is probably why the stock market looks as weird as it does right now.

See, with every previous bear market following a peak, the bear market lasts 2-3 years, but almost inexplicably we see a bear market through 2022 lasting less than a year, with the current run up being a positive indicator for the SP500.

My conclusion? We haven't actually seen the top of the market yet.
Because if we had, then the SP would have continued dropping for the next ~1.5 years, and just because the YC inverted doesnt mean we will IMMEDIATLY see the recession nor does it line up with the top of the market.
What we do have however is extremely positive growth signals (pop increasing/tech advances), a LOT more money in the market with the average investor in trading apps, more people returning to work, which will likely continue through the next few years. Of course anyone betting against the U.S. market is usually wrong as markets over time trend up logarithmically with bear markets sparse and lasting little more than 3 years. But that's the thing, it continues up LOGARYTHMICALLY and right now we are below that average line looking at the sp500 on a 20 year chart. Another run will happen beating 472 easy, likely followed by an actual bear market and recession, assuming the current YC inversion trends deeper, and doesn't immediately pop back up like it did in 2019, otherwise we may just not see the deep 2-3 year long bear market at all.

Thoughts?

submitted by /u/clementAiluros
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