The Longest Bull Market In History Is Over


Last week was another brutal week on Wall Street as the small-cap Russell 2000 and the Nasdaq both fell into bear market territory (defined by a decline of 20% or more from a 52-week high). The Dow and S&P 500 also fell closer to that dreaded 20% level. Underneath the surface, the action is much worse as investors continue to dump stocks. The biggest takeaway for me is that the 9.5-year connection between the stock market blindly following the Federal Reserve has ended. Meaning, for the first time since the Bull Market began in March 2009, the stock market is not blindly following the Fed. That tells me that there is a lot more negative action brewing on the horizon- both on Main Street and on Wall Street. Billionaire investor, Stanley Druckenmiller, has a great line where he says, the best economist on the planet is the stock market. I couldn’t agree more and if you look under the hood, so many important areas of the market are already in bear market territory which bodes poorly for both Main Street and Wall Street. Clearly, the market is speaking, and it is my job to listen.

Monday-Wednesday Action:
Stocks fell on Monday as fear spread that the economy will slow considerably in 2019 which may cause the market to fall into a bear market. In other news, DoubleLine Capital CEO Jeffrey Gundlach said Monday that he “absolutely” believes the S&P 500 will go below the lows that the index hit early in 2018 and it will most likely fall into a bear market. Economic news was not great. The Empire State Manufacturing Survey’s general business conditions index, aggregated by the Federal Reserve Bank of New York, fell to 10.9 from 23.3 in November, missing estimates for a gain of 20.6. Separately, Homebuilder sentiment fell to its lowest level since May 2015 in December as potential buyers delay purchasing new homes despite a pullback in mortgage rates in the past month. Stocks ended higher on Tuesday as the Fed kicked off its 2-day meeting. Tech shares popped from deeply oversold levels. President Trump urged the Federal Reserve to not “let the market become any more illiquid than it already is.” Stocks opened higher but closed lower on Wednesday after the Fed concluded its last meeting of the year. The Fed raised rates by a quarter point and reduced its projections for future rate hikes but the Fed left its future outlook the same which was viewed as hawkish.

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