EC When Is The Next Bear Market? 3 Things Will Tell

Of course, history already shows such will happen. Once the Fed begins to hike rates, market corrections occur quickly, generally within 2-4 quarters. However, recessions and bear markets take longer and get extended due to ongoing interventions. The current median time frame between the first rate hike and the onset of a recession is 11-quarters. (The shaded green bars denote rate hike campaigns.)

Next Bear Market, When Is The Next Bear Market? 3-Things Will Tell You

Notably, there are ZERO times in history where the Fed hikes rates that did not end negatively.

Conclusion

There is currently no indication of a recession. Nevertheless, the Fed continues to purchase $120 billion a month in bonds keeping the “psychological Fed put” in place.

The Fed is also keeping the overnight lending rate at zero, and the yield curve is nowhere close to inverting just yet.

However, these items will change quickly, and when they do, the clock will start ticking towards the next recession and bear market.

As noted in Slowly At First:

“Understanding that change is occurring is what is essential. But, unfortunately, the reason investors ‘get trapped’ in bear markets is that when they realize what is happening, it is far too late to do anything about it.

Bull markets lure investors into believing ‘this time is different.’ When the topping process begins, that slow, arduous affair gets met with continued reasons why the ‘bull market will continue.’  The problem comes when it eventually doesn’t. As noted, ‘bear markets” are swift and brutal attacks on investor capital.’”

Pay attention to these indicators. The Fed is discussing taper. The yield curve is flattening, and there is a risk the Fed will hike rates next year. These are all actions very reminiscent of previous market topping processes.

However, tops are hard to identify during the process as “change happens slowly."

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Mike Nolan 2 months ago Member's comment

Good, informative read, thanks.