Bear Markets Like This One

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Dear fellow investors,

We are getting questioned constantly on how long this bear market in U.S. stocks will continue. It’s a reasonable question, and as we always do, we look back at the most similar situations and view the depth and length of the most analogous bear markets of the last 60 years.

Key ingredients of this current and analogous bear markets:

  1. Massive financial euphoria attached to stocks
  2. Stocks are historically expensive
  3. Fed tightening credit to get inflation under control

Spencer Jakab from The Wall Street Journal seems to agree with us. In a recent article titled, "A New Bull Market Can't Start Until Investors Give Up,” he wrote the following:

"Dipping a toe back into the most-speculative assets because you believe everyone else has panicked isn't the sentiment that underpins sustained turnarounds. In May, Google searches for "capitulation" hit their highest since October 2008, the month following the collapse of Lehman Brothers. The S&P 500 had by then lost 38% from its peak a year prior and it seemed like things couldn't get any worse. They did: The bottom wouldn't come until early March of 2009 after another 31% loss for the index."

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