“The uncertainty gripping the stock market leaves investors pondering: is this a temporary correction testing our resilience, or an ominous sign of a ferocious bear market awakening from hibernation?”
I’m seeing a lot of chatter about a stock market correction today. What’s going on?
The S&P 500 has now corrected 10% from its July 31 peak, marking the first such correction since the market bottomed on October 12, 2022. Surprisingly, there haven’t been many red headlines about this, which suggests it is not viewed as a significant issue.
In fact, the S&P 500 has officially entered correction territory, down 10% from its July high. This drop has resulted in the market losing over $4 trillion in market cap since July.
The Nasdaq has also entered correction territory, and many technology heavyweights and oil giants have experienced significant declines. For example, Alphabet’s earnings disappointed investors, causing the stock to drop almost 10% for the week. Chevron shares also saw a decline of over 13%, the worst weekly decline in over a year.
While some may view this as a correction, others argue that it is actually a bear market correction. They propose that the recent rally was a 32% bear market correction, and now the bear market has resumed. In long bear markets, rallies of 50% or even 100% are common, so it would be premature to assume a new bull market has started until a new high is set.
Janet Yellen, former Chair of the Federal Reserve, has stated that higher yields reflect the strength of the economy and IRA success, not the deficit. However, some question the strength of the US economy and believe that inflation and deficit spending are artificially boosting the market.
In addition to the stock market correction, gold and bitcoin have experienced surges while treasuries have been hammered. This trend has been ongoing for months, with gold and bitcoin often acting in tandem.
Overall, the stock market correction has sparked discussions about the state of the economy, the impact of inflation and deficit spending, and the potential for a bear market to resume. It will be interesting to see how these factors continue to unfold in the coming weeks.