Is The Bear Market Over?

After rising more than 20% in three days, the Dow technically entered a new bull market.

That doesn’t mean the pain is over. A V-shaped recovery probably isn’t realistic.

The full economic impact of the lockdowns is still unknown.

I saw a headline a couple nights ago that I feel obligated to comment on.

Because the Dow Industrials are up 20% from their recent lows, the bear market is technically over and we’re now “officially” in a new bull market.

This headline was published before Friday’s sell-off, of course. But what are we to make of this?

To start, it’s probably far too early to dump every cent back into market. I’m nibbling on some stocks I really like, and I think it’s likely that we’ve seen at least a handful of good stocks already bottom out. But I have a hard time seeing the market shoot straight up from here. We still have no idea how long lockdown conditions are in place and what the impact will be on corporate profits.

Plus, even if the lockdowns were lifted today, life doesn’t’ just magically return to normal. Small businesses that saw their revenues evaporate over the past month are going to be licking their wounds for a while and likely cutting back on hiring, inventory and any planned improvements. Most small businesses operate on slim margins, and removing a month’s worth of revenues is a major setback.

Think about it. That car you wanted to buy will still get bought, even if your purchase is delayed a few weeks or months. But the restaurant meal you would have enjoyed, the shirts you would have had dry cleaned, the haircut you would have had… Those revenues are lost forever. You’re not going to eat twice as many restaurant meals, get twice as many haircuts or get your shirts dry cleaned twice to “catch up.”

Small businesses employ roughly half of America. It’s helpful for Congress to send us checks. But to pretend this is going to keep consumer demand high and avoid a nasty recession is utterly ludicrous.

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