The good news about this bear market in stocks is that we’re more than halfway through it. The bad news is that we’re getting close to the final stage, when “everything must fall.”
That’s according to the blogger behind Irrelevant Investor and the director of research at Ritholz Wealth Management, Michael Batnick.
He first explains the order of “indiscriminate selling” in a such a down market — speculative names, the leaders, the rest. That has been the playbook in the past, as shown by his chart from hedge fund Coatue (via Eric Newcomer) that breaks down the dot.com bubble bursting:
Irrelevant Investor/Eric Newcomer
A selloff in mid-2021 marked phase one, said Batnick. Meme stocks and some special-purpose acquisition vehicles got hit, along with Cathie Wood’s ARK Innovation ETF
ARKK,
which lost 24% in 2021 and is down 54% this year.
Earlier this year phase two swept in when the “tech generals fell one by one. Microsoft
MSFT
hasn’t been this far below its 200-day moving average since 2021. The uptrend that it’s enjoyed over the last decade is decidedly over,” wrote Batnick.
Read: Here’s why Britain’s Warren Buffett is sticking with Facebook’s parent and other beaten down techs
That brings us to the “everything” or phase three, and Batnick points out that only nine stocks representing $1 trillion in market cap were within 5% of their 52-week highs as of early Thursday, while 145 names representing $9 trillion are within 5% of 52-week lows.
He describes his list of more than 50 stocks in the latter camp as a “who’s who of American business.” They include Berkshire Hathaway
BRK,
BlackRock
BLK,
JPMorgan
JPM
and Morgan Stanley
MS
— a pair that got second-quarter earnings season off to a lousy start — then Facebook
META,
Microsoft
MSFT,
eBay
EBAY
in the tech space, other “generals” such as Caterpillar
CAT,
Deere
DE
and General Motors
GM.
Also on that list are Nike
NKE,
Disney
DIS,
3M
MMM,
Honeywell
HON
and Delta Air Lines
DAL.
There are “no winners,” in this last lap of the bear market, as Batnick reminds us. “A new bull market will begin eventually, but right now, we’re in the ‘everything must fall’ phase.
Read the full blog post here.
