什么是熊市(Bear Market)?

It's time to 'play defense' with stocks experiencing a classic bear-market rally, Wells Fargo warns

Stocks won't exit the bear market until the Federal Reserve's last interest rate hike, according to Wells 什么是熊市(Bear Market)? 什么是熊市(Bear Market)? Fargo.

Investors need to be cautious despite major indices' recent gains, CIO Darrell Cronk told Bloomberg TV.

"This very much looks like a bear market rally… you've got to play defense," Cronk said.

It'什么是熊市(Bear Market)? 什么是熊市(Bear Market)? s time for investors to get defensive and consider jumping out of stocks, which look caught in the middle of a bear-market rally, according to a Wells Fargo investment chief.

Darrell Cronk told Bloomberg TV he's skeptical about how well equities will perform over the rest of 2022, even though the S&P 500 has climbed more than 15% since hitting a low for the year in June.

"This is the 什么是熊市(Bear Market)? 什么是熊市(Bear Market)? question: Is this a bear market rally or the start of a new bull?" Cronk, CIO for Wells 什么是熊市(Bear Market)? Fargo Wealth and Investment Management, said on Friday. "This to us very much looks like a bear market rally."

"People forget that as bear markets get older, the bear market rallies get larger. This is the largest one we've seen, we've had six S&P 500 rallies during this bear of 7% or greater."

He believes the S&P 500's recent rally isn't sustainable, given the US benchmark has failed since April to break above its 200-day moving average. If stocks rise or fall through this key resistance level, it's seen as a change in long-term direction.

"The fact that we've 什么是熊市(Bear Market)? failed off the 200-day to us still says that you've got to play defense," Cronk said — suggesting they pivot away from stocks, and into less risky and volatile markets such as bonds or cash.什么是熊市(Bear Market)?

The Wells Fargo CIO said bear markets don't end three things happen: housing market forward indicators hit a bottom, earnings estimates fall significantly or trough, and the Federal Reserve is on the verge of stopping its interest rate hikes.

"You've got to get closer to the Fed being at or within sight of their last interest rate hike," he said. "We think we're still probably at least six months away from that."

"So, bear market rally — play defense here from a risk standpoint," Cronk 什么是熊市(Bear Market)? 什么是熊市(Bear Market)? said.

Markets have gained thanks to some investors' expectations that the Fed will pivot to start cutting interest 什么是熊市(Bear Market)? rates soon. But Wall Street strategists have warned that the US central bank's current hiking cycle won't end until 2023.

Analysts at Goldman Sachs, Bank of America, and HSBC all said last week that the Fed will likely continue to hike until nominal rates are at 4%, around 150 basis points above 什么是熊市(Bear Market)? 什么是熊市(Bear Market)? their current level.

Welcome to the Bear Market of 2022

This is my fourth bear market as defined by a 20% or more decline in the S&P 500. Based on what I have learned from the previous three, I do not expect this one to be any different.

The average bear market lasts 15 months; this means we could be in this market until the middle of next year.

Bear markets are 什么是熊市(Bear Market)? like storms; they arrive, do their best (or worst) and then they leave. There will be a bear 什么是熊市(Bear Market)? 什么是熊市(Bear Market)? market about twice in a decade and a recession about once every six to seven years. You cannot 什么是熊市(Bear Market)? avoid them, so it is best to accept them and learn how to take advantage.

While I do 什么是熊市(Bear Market)? 什么是熊市(Bear Market)? 什么是熊市(Bear Market)? not think this bear market is the prelude to another great depression or even a great recession, we 什么是熊市(Bear Market)? need to be prepared that stocks will fall further than expected because of the very overvalued conditions we 什么是熊市(Bear Market)? had in 2021. Things always overshoot to the downside because fear is more powerful than greed as a driving emotion. Predictably, many people will do very foolish things like liquidate at or near the bottom. We 什么是熊市(Bear Market)? don't need to be one of those people.

Predicting a bear market in time is exceedingly difficult. The 什么是熊市(Bear Market)? important thing is regulating your behavior during a bear market. As such, I suggest that you first breathe and do nothing. Then think before inverting.

The first two steps are obvious. The idea here is to liquidate our fear (not out portfolio). Resist the urge to cut and run. It is too late to sell anyway, so the best thing to do is be is to be thoughtful and take your time before acting.

The third step is counterintuitive. Charlie Munger (Trades, Portfolio), quoting German mathematician Carl Jacobi, said, "Invert, always invert." This means turning the problem upside down and looking at it again. Sometimes doing the opposite of what you want to do makes more sense. Perhaps we should welcome bear markets as 什么是熊市(Bear Market)? an opportunity. It may not feel like it, but this is the season to sow seeds for our next harvest. Think about it, there was a stock you loved last year and could not wait to buy it. Now it is selling for half the price. Is that a bad thing? Most likely not, unless we tip into a long depression (which is possible but not likely) or the company was overleveraged to begin with and might go bankrupt. In most cases, it may make sense to just sit tight 什么是熊市(Bear Market)? and if the company is still solid, to buy more. Once the bear market ends, weak stocks (provided they have survived) will go up much faster than strong ones.

Do not run blindly toward safety. Rather, embrace risk using common sense. The risk-return ratio is still alive, bear market or not, so focus on survivability, not just safety. A lot of people will be running toward safe stocks like consumer staples and dividend aristocrats, but then these stocks become too expensive because everyone wants them. At that point, they may no longer be of good value.

I also recommend avoiding all-in or all-out bets. Rather, edge in or out of positions gradually. If I am particularly nervous about a stock, I might sell that one and buy another one I feel is of better value. As a result, you swap your way to better quality and avoid sitting on cash.

Bear markets are also full of bull traps. They will lure you in and then go down some more. Make sure you have enough stamina and resources to survive 什么是熊市(Bear Market)? if that happens. Do not be afraid of missing the bottom as there will be plenty of time 什么是熊市(Bear Market)? 什么是熊市(Bear Market)? to buy as the stock market recovers. One technique I use is not to buy anything with new money until the 50-day moving average starts to go up. While we will miss the bottom, we will avoid the worst of a bull trap.

For example, I am currently interested in Meta Platforms Inc. (NASDAQ:META), but will buy it when the 50-day moving average starts sloping upward.

Wishing you all a happy 什么是熊市(Bear Market)? bear market. We may not realize it now, but bear markets are where we end up making most of our money.

Three Ways How To Profit From A Bear Market Rally

Discover everything you need to know about crypto rallies: The difference between bull and bear rallies, why they happen, and how you can identify them quickly.

What causes a bear market rally?

Bear market rallies are usually caused by “bottom fishing.” This 什么是熊市(Bear Market)? term describes investors who eagerly watch a downturn and await signs of an…

Bear market poised to last longer despite recent Wall Street rally, Morgan Stanley warns

Morgan Stanley strategists say relief rally unlikely to last long as inflation rages

UBS Managing Director and Senior Portfolio Manager Jason Katz discusses the impact of inflation on the markets.

Inflation is a process: Market expert

UBS Managing Director and Senior Portfolio Manager Jason Katz discusses 什么是熊市(Bear Market)? the impact of inflation on the markets.

The recent rally in the U.S. stock market will likely prove to be short-lived, according to Morgan Stanley analysts.

Equities have climbed steadily high since mid-June, thanks to 什么是熊市(Bear Market)? some weaker economic data that buoyed expectations of a dovish Federal Reserve and solid quarterly earnings reports from big companies that proved mostly resilient to inflation. The S&P 500, Dow Jones Industrial Average and Nasdaq Composite all notched their best month since late 2020 in July.

But the relief rally is unlikely to last 什么是熊市(Bear Market)? 什么是熊市(Bear Market)? long as investors continue to weigh scorching-hot inflation, a slowdown in economic growth and higher interest rates, Morgan 什么是熊市(Bear Market)? Stanley strategist Michael Wilson said in a Monday analyst note. Wilson predicted that share prices will slide in the second half of the year as investors digest the increasingly grim economic outlook.

"The macro, policy and earnings set-up is much less favorable for equities today," Wilson wrote in a note, adding that worse-than-expected earnings reports over the next few months could trigger another market rout. "The risk/reward is unattractive and this bear market remains incomplete."

New York Stock Exchange

People walk outside of the New York Stock Exchange (NYSE) on July 25, 2022 什么是熊市(Bear Market)? 什么是熊市(Bear Market)? 什么是熊市(Bear Market)? 什么是熊市(Bear Market)? in New York City. ((Photo by Spencer Platt/Getty Images) / Getty Images)

A cooler-than-expected inflation report last week 什么是熊市(Bear Market)? 什么是熊市(Bear Market)? that showed consumer prices rose 8.5% in July – a slower pace than economists expected – raised 什么是熊市(Bear Market)? hopes that the Fed could start to slow the magnitude of its interest rate hikes. But Wilson said that inflation is "not likely to come off at a pace fast enough to spur the type 什么是熊市(Bear Market)? 什么是熊市(Bear Market)? 什么是熊市(Bear Market)? of sustained Fed pause the equity market is already discounting."

After a blisteringly hot July jobs report showed 什么是熊市(Bear Market)? that employers added 528,000 jobs last month, nearly double what economists expected, Wilson sees a far slimmer 什么是熊市(Bear Market)? chance of a dovish policy path for the Fed.

"Our fair value framework suggests the market's ERP is ~150 basis points too low based on current data," he said.

There is a growing consensus on Wall Street that the Federal Reserve will trigger a recession as it battles inflation with a series of aggressive interest rate hikes. Policymakers approved the second consecutive 75-basis point rate hike in July and have 什么是熊市(Bear Market)? indicated that another super-sized rate hike is on the table in September, depending on forthcoming economic data.

Fed Chairman Jerome Powell

Federal 什么是熊市(Bear Market)? 什么是熊市(Bear Market)? Reserve Board Chairman Jerome Powell speaks during a news conference in Washington, D.C., on July 27, 2022. ((什么是熊市(Bear Market)? Photo by Mandel Ngan/AFP via Getty Images) / Getty Images)

Fed Chairman Jerome Powell has said that tackling inflation remains the central bank's No. 1 priority, even if it means risking a downturn — though he stressed that he does not believe the U.S. is currently in a recession.

"We think it’s necessary to have growth slow down," he said in July. "We actually think we need a period of growth below potential in order to create some slack so that the supply side can catch up."