In this clip, Aaron and I discuss the murky topic of predicting a bottom in the markets. Now, it’s nearly impossible to predict a stock market bottom. But one universal truth? Eventually, every bear market ends – and a new bull market begins – facilitating new stocks to buy.
And though we may not be able to predict this bear market’s exact finale, we can follow the data today to prepare for that new bull market tomorrow.
Since 1929, the median bear market decline has been 29% over 12 months. Currently, we’re at a 30% decline over 11 months – almost exactly in line with that historical average. Valuations are washed out, near levels that marked the bottom of previous bear markets.
The S&P 500 has collapsed to its 200-week moving average – and nearly every bear market of the past 70 years has bottomed at or around that level. Not to mention the index has fallen into oversold territory, which – you guessed it – usually marks its bottom.
Breadth, investor sentiment, cash positioning, the put/call ratio – the list goes on and on. Indeed, these signals are flashing everywhere. And absent a “Lehman moment,” stocks will be higher in 12 months. We don’t need to time a bottom here – we just need to prepare for that new bull market.
That’s why we’ve gone on a major shopping spree in Innovation Investor and Early Stage Investor. Find out which types of stocks we’re buying in this week’s episode!
On the date of publication, Luke Lango did not have (either directly or indirectly) any positions in the securities mentioned in this article.