Runaway Bear Market Blows Past Everything Meant to Slow It Down

Unwavering profit projections. Benign chart patterns. Big hedges in the options market.

All the things that bulls expected to put a brake on the worst equity selloff in 30 months have just summarily failed.

The Federal Reserve, with an assist from UK policy makers, overpowered them all to deliver a week that rocked financial markets around the world and sparked warnings of potential systemic strife. Down for a sixth time in seven weeks, the S&P 500 sank to fresh bear-market lows. Notching a 25% decline in nine months, the benchmark index has now suffered its third-worst performance at this point of a year since 1931.

Bulls still point to signals that the bottom could be nigh, yet the pattern of past market cycles suggests the pain for American equities can easily persist.

Take a simple accounting of prior bear markets, where the average selloff hit 39% over 20 months. That would imply another 19% drop from here. Or look at how past tightenings have coincided with stock moves. While not all Fed hiking cycles spelled doom for equities, those that did typically failed to find a floor until the central bank reversed its course -- a prospect no one on Wall Street can take seriously anytime soon until price pressures subside.