Despite the last correction և no matter what popular standard you use. PE, Shiller’s CAPE ratio or Buffett’s Market GDP ratio; This is one of the most expensive markets since 1923. The other two were the markets of 1929 և 2000, և we know how they turned out. By the way, 1923 was the year when the Composite Index, the precursor to the S&P 500, was introduced.
The protocol shows that while stock prices may remain high for a long time, they eventually change to average. This can happen in one of two ways. Either the market fluctuates for a long time until revenue is reached, or there is a sharp decline to bring prices in line with historical PE ratios, which is the opposite of the average. History has shown that investors are not a patient group. They will endure the side market for a while, but in the end they will get tired of the low profitability, they will work their money where they think they will bring more profit potential. As soon as the ball rolls, the market comes out en masse, շուկ there is a brutal bear market. The result. There is a big decline in the market.
The question is, when was the correction of this past a prelude to a great decline? A study of the main bear markets shows that the latter is more likely. Indeed, a review of a market decline of more than 28% since 1923 shows that there is always a prelude to every major bear market. Some people have the wrong impression that stock market crashes are happening at the top of the market. That is far from reality.
The stock market may be volatile, but prudence is good. It always warns us in advance of an impending accident, catching our attention with a sudden drop in our self-satisfaction, allowing us to get out before it crashes seriously. This is shown in the analysis below for each of the following major bear markets (down 28% or more). For the S&P 500 since 1950. Therefore, the Dow Jones Industrial Average closures were used for those markets before that.
The initial market peak of 2007 took place on July 17, when the S&P 500 had the highest current level of 1555.90. The index will fall next week և will eventually fall to և 1370.60 daily low a month later on August 16 – a decline of 11.9%. From now on, all the high and low indicators are up to date, unless otherwise noted. The market will rise for seven weeks to reach the peak of the market on October 11, 2007 with an index of 1576.09, 1.3% higher than its previous high. The initial 5.5% decline was followed by a rapid recovery to October 31, 1552.76, before falling 10.8% to the November 26, 2007 low of 1406.10. The index will be restored to և1523.57 maximum և will continue a number of low low և high till 2009. March 9, 666.79, down 57.7%.
The 2000 market gave many warnings before the fall of Dot.com. Immediately after the opening of the New Year on January 3, the market fell. After reaching a high of 1478, the S&P 500 fell to 1455.22 at the close. Over the next three days, it dropped from 1,400 to 1465.71 in 2000. The highest index of January 20. From there, it fell to the lowest level of 1329.15 on February 25, a decline of 10.1% from the highest level ever. The market finally reached its peak in 2000. March 24 with 1552.87 points. On April 14, it will fall sharply to a low of 1339.40, a 13.7% decline, but then slowly recovered to 1530.09 by 2000. September 1, only 1.5% lower than all its indicators. Then it came down steadily with some sharp declines, followed by rallies, but only downward. The market fell by 775.80 points on October 9, 2002, down 50.1%.
The bear market of 1987 was rapid. After hitting a high of 337.89 on August 25, 1987, the S&P 500 fell to 308.58 on September 8, hitting 8.7%. It recovered rapidly to 328.94 on October 2, only 2.6% lower than its high. It fluctuated below 300 on October 15, before crashing the following Monday, closing at 224.84 points, a 20.5% loss for the day. It would close on December 4, 1987 with 223.92 points, but the low of the movement came the day after the fall, October 20, when it fell to 216.46 for a 36.0% loss from the August high.
This, along with the 1968 bear market, was part of the mega bear market, which spanned the years 1967-1982. The S&P was in the 100 և 110 range for most of the year. It cleared the 110 barrier at the end of the summer, only to return to it by the end of the year, reaching its final growth by the end of the year. It peaked on December 12, 1972 at 119.79 points, then fell 4.3% to 114.63 on December 21, 1972. The New Year raised the index to a peak of 121.74 on January 11, 1973, an increase of 1.6% from the previous highest. It fell rapidly to 111.85 until February 8, then continued to decline, with a number of declines until 1974. Reaching below 60.96 on October 4, 49.9% loss.
After an initial decline at the beginning of the year, the market rose steadily from March to November, finally surpassing December 2, 1968, when the S&P 500 peaked at 109.37. The index fell to 96.63 on January 13, 1969 (down 11.6%), fell below 0.43 points on March 17, and then rose to 106.74 on May 14, 1969. After reaching 2.4%. On May 26, 1970, it dropped to the top with 68.61 points. It was 37.3% haircut.
The stock market was steadily rising from October 1960 to December 1962, when the S&P 500 rose 72.64 points on December 12, 1962. It then fell to 67.55 on January 24, 1963 for a 7.0% loss. The next week the index quickly returned to 70 և the next month recorded a slight increase, finally reaching 71.44 on March 15, down from a high of 1.7%. Then, on June 25, 1962, the index fell to 51.35 points, down 29.3%.
The market has been in decline since the last part of World War II, beginning in 1946. in the same way, gaining 8% by February. The S&P 500’s current high և lows were not available for analysis, so the Dow Jones Industrial Average closure will be used from now on. The Dow Jones closed in 1946. on February 5 with 206.61 points. Then the index fell by 10% and closed on February 26 to 186.02 points. It quickly regained its former peak, surpassing it on horseback until 212.5 in 1946. May 29 – 2.9% growth. from its former height. The bumpy journey continued until August, when the index reached 204.52 on August 13, then fell into disrepair, finally closing on October 9, 1946 at 163.13 for a 23.2% decline. Despite a number of rally attempts, the market would continue to struggle until February 1948, with a maximum loss of 28%.
After a sharp decline from 1929 to 1932, the market seemed to be in recovery mode until it rose in early 1937. The Dow Jones closed at 194.4 on March 10, 1937 to mark the end of the uptrend. Then the index fell for three months until June 14, 1937 to 165.51 points for a loss of 14.9%. It spent the next two months on a steady rise, finally reaching 189.34 on August 16, down 2.6% from its previous high. This was its last speed, when the market fell by 49.1% until 1938. March 31, its 98.95 point, the closing of the Dow Jones.
Like the 2000 market, the Big 29 crash gave many warnings. After reversing in the first half of the year, the market corrected by 10.0%, when it closed at 326.16 Dow Jones from May 6 to 293.42 on May 27. It then rose fearlessly, reaching a market high of 381.17 on September 3. , 1929. It initially fell lower, but then gained momentum until Friday, reaching a low on October 4 at the close of 325.17 Dow Jones closed 14.7%. It made a crazy effort to recover next week, but was only able to rule on October 10 with 352.86. 7.4% below the September high, the lowest percentage close to the previous high in any of the bear markets. Then again, this was the grandfather of all the bears. Ten trading days later, on October 24, the index closed below 300. It fell on Monday, October 28, and again the next day, closing at 230.07. The market continued to decline until 1932. The Dow Jones industrial average fell 41.22 points on July 8, falling a record 89.2%.
Historical records show that every major bear market since 1923 has always warned investors. After reaching the apparent peak, they experienced a significant decline, then rose again, after which they experienced a sharp decline. In both cases, in 2000 և 1929, it issued two warnings. the first corrects months before reaching the peak, and the second after reaching the peak.
After the initial peak, the declines ranged from 14.9% to 4.3%, with an average of 10.8% and an average of 11.6%. In three of the nine cases, in 2007, 1973 և 1946, the second peak was lower than the first. The range was from 7.4% loss to 2.9% growth, with an average of -1.4% -1.7% median. Taking out the emissions of 7.4% in 1929, the average was -0.63% and the average -1.6%. The interval between the two peaks ranged from 30 days to 5.4 months, with an average of 96.7 days and an average of 93 days.
Given the fact that we are in the early stages of a large bear market with a և 10% correction, what can we expect? Examining the data, it turns out that we are average. There seemed to be no connection between the two seasons between the two peaks of the bear market. However, five out of six times the market has undergone a bona fide correction, 10% or more, it took months from 2.9 to 5.4 months for the market to rise and begin to seriously decline. A notable exception was the 1929 crash, which lasted only 37 days between the first “peak seconds”. Although there was no consistent pattern for the depth of the initial decline և the overall decline, it is noteworthy that the four largest initial declines led to a 49% և more decline. which was reached only after a 4.3% decline in the bear market in 1973. . There is no noticeable correlation between the initial decline ակի second peak level and the general decline և second peak level և.
It may be that Morgan Stanley’s prediction this Monday that it may slow down in the second quarter may be correct. We have already risen from -7.4% since 1929, so it seems that this market does not connect well with that one, waiting for the next decisive peak will be measured in months. Regardless, I warn everyone to keep a close eye on market progress. If the S&P 500 gains 2.6% on January 26, or 2898, or 2798, this is your signal to exit the stock market. It’s pointless to be greedy for the last 1 or 2 percent profit, to risk losing a lot more.