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A trader works on the floor of the New York Stock Exchange in Manhattan on Oct. 23, 2018.BRENDAN MCDERMID/Reuters

For investors trying to call the end of the bull run for stocks, the headline performance of the world’s equity markets this year may not be telling the whole story.

Up until Wednesday’s decline, Wall Street’s S&P 500 had been up 2.5 per cent for the year, continuing its longest bull run in history. Meanwhile, the MSCI All-Country World Index, a widely watched gauge of world stock market health, had lost just 5 per cent despite fears of a global trade war and a slowdown in China’s growth.

But according to data analyzed by Reuters, the proportion of stocks, regions and sectors that are technically in a bear market has shot up since the start of January, prompting some analysts to conclude the bull run may already be over.

At the start of the year, 9.3 per cent of the individual constituents of the S&P 500 index were in a bear market – defined as stocks that have fallen at least 20 per cent from their 12-month peak.

By Oct. 22, the percentage had climbed to 34.1 and more than 70 per cent of the stocks were in correction territory, defined as a fall of at least 10 per cent.

The return of the bears is even more pronounced outside the United States. According to Merrill Lynch, 58 per cent of the 2,767 stocks in MSCI’s global index are now in bear market territory.

In Europe, the STOXX 600 has fallen a limited 9 per cent this year, but the percentage of bear market constituents in the index has jumped to 46.2 from 10.2 at the start of 2018.

The concern among some analysts is the surge in securities hitting the 20-per-cent loss mark could lead to a tipping point and falls of a similar magnitude in overall indexes – which typically leads to a long-term downward trend.

“It’s really an indication that a global bear market has probably already started,” said Albert Edwards, global strategist at Société Générale.

He said other technical indicators, such as the breadth of the market – the divergence between individual performances within an index – pointed to the same conclusion.

Such rules of thumb about bear markets are by no means foolproof, but they are closely monitored by money managers and investors for whom calling market turns correctly is paramount.

Still, Mr. Edwards has a reputation for being a permabear owing to his often-pessimistic views and other analysts caution the increase in bear market constituents could be read in two ways.

Either the creeping bear forces a further investor capitulation and long-term funk, or it slowly releases air from what many assumed were bubble-like valuations and eases the pressure to cut and run.

Analysts who side with the second view say the bull market won’t run out of steam until the U.S. economy slips into recession.

Many influential investment houses such as Goldman Sachs Group Inc. continue to take the view that tax cuts under the administration of U.S. President Donald Trump and the U.S. economy’s momentum will propel markets further.

“Economic expansion and the long-bull market in equities should continue in 2019,” the investment bank wrote last week, pointing to rising U.S. corporate sales and profits.

Rotting from the tail

For the pessimists, the flurry of mini-bear markets within catch-all stock market indexes – even among those still showing positive returns this year – is becoming hard to ignore.

Other indexes that have seen a marked rise in bear market constituents include global emerging markets, Chinese shares and European autos and banks.

In the United States, the Nasdaq 100 – which on Wednesday fell 4.4 per cent and is now down more than 10 per cent from its August high - has seen the percentage of its bear market constituents surge to 43.7 from 7.8 in January. The Nasdaq’s tech shares have spearheaded the bull market for the past two years.

Some analysts say this suggests that while popular stocks can still thrive, a growing number of stocks are quietly collapsing in the background.

In Germany, the change of fortune has been particularly brutal for the blue-chip DAX. Only two of its 30 stocks were in bear market territory in January but now there are 18.

In Japan’s Nikkei, which has only lost 3 per cent in 2018, bear market stocks made up 48 per cent of the index on Oct. 22, up from just 4.9 per cent at the start of the year.

“They say fish rot from the head but in the market’s case, it’s rotting from the tail onwards,” said Société Générale’s Mr. Edwards.