In September it will be 45 (!!!) years since, being unable to get a college teaching job I would accept–or, arguably, any job at all, I stumbled into the US stock market. I mention this both because I find it hard to believe and, more importantly, to underline that I learned the trade in a radically different time. There were tons of securities analysts, spread over numerous brokerage and professional investment shops, no trading bots and a vibrant, sophisticated financial press.

Today, the analyst community is much smaller and the only really good reporting comes from the Nihon Keisei Shimbun family (which includes the Financial Times and the Economist). Trading bots rule short-term trading. But you and I have almost infinitely quicker access to company SEC filings through the SEC edgar site.

All in all, the chance of success for an individual willing to take a six/twelve month view and read SEC filings intelligently seem to me to be much higher than when I started out.

Trading bots, however, and whatever other relatively clueless short-term trading there may be both make the daily or weekly signals from changing stock prices much harder, for me at least, to read.

I’m writing all this as a warning, to you and to myself, not to bet the farm on what I’m now thinking.

That’s that the US stock market appears to me to be bottoming. What makes me say this?

–bear markets tend to last between 12 and 18 months. This one began on 12/1/21. We’re now in month 16 past the peak.

–from the top to recent lows, NASDAQ lost a third of its value, the S&P 500 a quarter. Yes, that’s not as bad as the meltdown of 2007-09, but the global financial system hasn’t collapsed under the weight of massive bank fraud (and the unwillingness of Congress to either come to the rescue )a Republican refusal) or punish the fraudsters (both parties)) this time around. In fact the rescue package has probably been too big. So arguably we’ve had enough pain. even for a worse-than-garden-variety recession.

–in bear markets, investors react strongly negatively to bad news and tune out good. Produce good numbers/stellar guidance and unchanged is the best you can hope for. Produce ugly numbers/lackluster guidance and the stock plunges.

At some point, however, and not necessarily for all stocks, valuations will have fallen far enough that investors begin to weigh strong long-term earnings potential against the blemished here-and-now. TGT and WMT, for example, both reported poor 4Q earnings and weak 2023 guidance last month. Both were flattish on the news and gradually rallied rather than declined.

This reaction may be a formal calculation of the assumed net present value of future earnings, or an evaluation of the worth of the brand names, or even just the informal read that the worst of the negative surprises are behind us and the stock is probably not going to get much cheaper–or all of this. The main thing is that the stocks don’t show a typical bear market-style collapse.

My read is that the market is doing this, as well as something a little more subtle. It’s separating winners from losers, based on its analysis of a company/sector’s chances to rebound as the economy recovers. In other words, the companies/sectors with longer-term issues, which are not going down solely because of current economic conditions (think: big-city office buildings, the FAANGs) aren’t showing the same signs of life as presumed next-cycle winners are.