The “Stealth” Bear Market; For Many It Has Arrived

The “Stealth” Bear Market; For Many It Has Arrived

A very poor 2022 start for equities, off to their poorest start since 2011. Fixed income markets are faring no better with the 10-Year Treasury up 26 basis points since New Year's Eve (1. 77% vs. 1. 515) (Bond prices fall when yields rise). In addition, the yield curve continues to flatten (short-term rates rising faster than long-term rates) signaling that markets see the strong possibility of recession. There are two driving forces; Slowing corporate profits certainly figure in equity values, but the bigger issue here is the Fed's intention to significantly remove liquidity, the Mother's Milk of rising share prices. And, of course, the anticipation of rising interest rates has an immediate negative impact on existing bond prices, as markets immediately discount to the newly anticipated yield curve. But what the media has generally missed is that, while the indexes themselves have recently fallen from their highs, a goodly portion of the components of those indexes are already in a "bear" market. As shown in the table, all the major indexes are significantly off their end of year highs. Nasdaq, with all the technology components, is already in "correction" territory (defined as -10% from the nearby peak) with the