violently sideways?

Recently, two thoughts about the overall US stock market have been rattling through my brain pretty consistently:

–at one point back in the dim past of the last century (I think), the market strategist for Goldman, Abby Joseph Cohen, opined that we were in a bear market in time, not in value.

(An aside: the problem I always had with Goldman equity research when I was working is that the macro- or microeconomic analysis was always at least as good as anyone else’s, but that the analysts always struggled to connect their elegant theoretical construct to what was happening then, or what was likely to play out later, in the real world of Wall Street. Sort of like offering great stratomatic baseball tactics as complete solutions for running a professional team.)

It almost never happens in the real world that markets go sideways. Usually they either go up or down. But that time Ms. Cohen’s unusual conclusion was exactly on the mark.

–I read a comment from an online source I can’t recall (skimming is an incredibly useful skill for investors, I think) that made the same kind of comment, adding that day-to-day volatility would likely remain high. “Violently sideways” is how I filed it away.

Put another way, this claim is that all the bad stuff is out in the open and has been mostly discounted and good things could actually happen–during a period when the prevailing market sentiment is gloom and doom.

Real world support for the latter idea comes in the good earnings, and post-report performance, from MSFT and FB.

Looking at this neon light from the unconscious mind from another perspective, the overall US stock market has been in decline for about half a year. During this period, the S&P is down by 10%, NASDAQ by 20% and ARKK by 60%. One could argue that this is enough stock market damage for a world economy–and a US, in particular–that is arguably in recovery. Interestingly, since the invasion of Ukraine, the S&P is off by less than -0.6%, NASDAQ by -3.5%. ARKK has lost about a quarter of its value (that’s a story for another time).

On the other hand, a typical bear market lasts for at least 8-12 months. This would imply a potential upturn during the summer at the earliest. Given that June-August are usually pretty dead times for Wall Street trading–as most major decision makers go on vacation–September might be a better guess.

more tomorrow

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