The current 9.4% slide in the S&P 500 is defying historical bear market patterns, suggesting the recent volatility may be a “growth scare” rather than a prolonged collapse.
The Speed Trap: Missing the ‘Quick Drop’
Data from Carson Investment Research indicates that the current market environment lacks the velocity typically seen during the onset of a true bear market.
Ryan Detrick, Chief Market Strategist at Carson Group, noted that since 1950, the S&P 500 usually hits a 5% decline with extreme speed, averaging just 14.5 trading days.
In contrast, the “current mild pullback” that began on Jan. 27 took a staggering 35 trading days to reach the same milestone. Detrick highlighted that this duration “would by far be the most ever should this turn into a bear market,” suggesting the sluggish pace of the decline may actually be a bullish signal for long-term investors.
Morgan Stanley: The ‘End Stage’ Is Near
While the pace is slow, fundamental analysts believe the floor is close. Michael Wilson and his team at Morgan Stanley issued a note Monday stating that the correction is “getting closer to its ending stages,” reported Bloomberg.
Despite the ongoing Iran war and the closure of the Strait of Hormuz, Wilson argues that much of the geopolitical risk is already baked into prices.
“We think the equity market is less complacent on growth risks than the consensus believes,” the strategist wrote. They pointed to the fact that over half of the Russell 3000 stocks are already down 20%, indicating that a “stealth bear market” has already worked through the broader system, even if the S&P 500 index remains more resilient.
War And Rates: The Final Hurdles
The path to recovery isn’t without obstacles. Brent crude reached $107.35 a barrel, at the last check, as conflict intensified in the Middle East, and the 10-year Treasury yield is nearing 4.5%, currently at 4.33%.
Morgan Stanley warned that “interest-rate hikes still pose a threat,” noting that the sensitivity of equities to rates is at a multi-year high.
However, with positive earnings growth acting as a buffer, the firm agrees that the “cumulative probability” of resuming trade flows is higher than that of a full-blown recession.
S&P 500 Down 9.4% From Records
The index has declined 9.41% from its record of 7,002.38 points, as of Monday’s close. It was down 7.51% year-to-date but up 13.04% over the year.
Similarly, the Nasdaq Composite index was down 13.43% from its record of 24,019.99 points, as of Monday. It declined 10.51% YTD and was up 20.21% over the year.
The SPDR S&P 500 ETF Trust (NYSE:SPY) and Invesco QQQ Trust ETF (NASDAQ:QQQ), which track the S&P 500 and Nasdaq 100 indices, respectively, were higher in premarket on Tuesday. The SPY was up 0.93% at $637.86, while the QQQ advanced 0.88% to $563.19.
Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.
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