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Forget the Santa Claus rally, the stock market is pitting against one of its worst December months of recent memory, and the Nasdaq is now on the brink of a bear market. This is a scenario that could unofficially mark the beginning of the end of the longest bull market in equity markets.
As of Wednesday's decline, the Nasdaq Composite Index
COMP -1.68%
On August 29, the widely accepted definition of the bear market on Wall Street is a drop of at least 20% from a recent high, leaving the stock market gauge heavily loaded with technology and the Internet. throw bearish territory.
According to Dow Jones Market Data, the Nasdaq entered a bear market for the last time on March 3, 2009 and came out of this phase less than three weeks later.
According to some estimates, the index is expected to fall to 6,487.75 to slip into a bear market, with other subindices having already retreated, including the Russell 2000 index.
RUT, -1.68%
Dow Jones Small Cap Equity and Transportation Average
DJT, -0.53%
less than 24 hours ago.
On an intra-day basis, the Nasdaq briefly fell into a bear market, sliding to a Thursday low of 6,484.04 after an intraday peak of 8,133.30.
Lily: The last key death cross has engulfed the stock market
On Wednesday, the already fragile shares fell sharply after the US Federal Reserve raised short-term interest rates for the fourth time this year (the ninth time since 2015) and presented expectations of future rises less favorable to recovery. of the market. investors had hoped.
The Fed raised its interest rates by a quarter of a percentage point, in a range of 2.25% to 2.50%, as expected, and President Jerome Powell said the rises in 2019 had been reduced to three instead of two.
However, investors have decided that monetary policymakers have not responded enough to a market plummeting since early October, the three major equity benchmarks, including the Dow Jones Industrial Average.
DJIA, -1.41%
and the S & P 500 index
SPX, -1.28%
already in territory of correction, generally defined as a decline of at least 10% compared to a peak.
Lily: Opinion: the darker message for investors during the liquidation of FAANG
The bull market has seen a decade of financial and political turmoil, thanks in part to the all-you-can-eat liquidity feast organized by the Federal Reserve and other major central banks.
Check-out: Powler Party Powler: Here are the worst performing stocks after the Fed destroyed the market
And maybe no index has ever benefited from this background than the Nasdaq, with its contingent of very powerful components, including Facebook.
FB -0.56%
Apple
AAPL, -1.46%
Amazon.com
AMZN, -2.89%
Netflix
NFLX, -4.38%
and Google Parent Alphabet
GOOG, -0.93%
GOOGL, -1.03%
– a group of companies known as FAANGs, which, due to their excessive market values and stock prices, have made the most significant contributions to the gains made over the past ten years.
Last year, the Nasdaq was ahead of its peers, posting a 28% return for the full year, versus 25% for the Dow and 19.4% for the S & A. P 500. Up to 2018, the S & P 500 is expected to lose 6.2% in value, the Dow is set for a drop of 5.7%, while the Nasdaq is considering a decline of 3.9% .
A separate index representing the largest Nasdaq companies, the Nasdaq-100
NDX, -1.60%
17.2% from the peak reached at the end of August, at Wednesday's close, according to data from FactSet.
Lily: Text of the FOMC Declaration for December
The Fed has adopted a seemingly stricter position advocated by Powell and the market is reacting badly to the transition, as this implies an increase in borrowing costs for institutions and individuals and increased competition from fixed income assets that will offer richer yields with theoretically less risk.
On August 22, 2018, many market experts praised the stock market, unofficially becoming the longest bullish event ever, after avoiding an "official" bear market at 20%. This decision outperformed the bull market from October 11, 1990 to March 24, 2000.
(Certainly, some market participants are contesting this recording, including Stock Trader's Jeff Hirsch Almanac.)
In any case, this uninterrupted record of earnings, unofficial or otherwise, is compromised.
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