"We are in a bear market"

Morgan Stanley analysts presented a six-word reality test this morning in a research note addressed to clients: "We are in a bear market".

<p class = "canvas-atom text-canvas Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = "Although the S & P 500 (^ GSPC) the index has only fallen from a corrective point of view since its September intraday high, as stock prices have moved this year, "we are in the middle of a bear market," writes Morgan Stanley analyst Michael Wilson. 16 "> Although the S & P 500 (^ GSPC) the index has only fallen to corrective levels since September's intraday high in September, the evolution of equity prices this year suggests "we are in a bear market," the analyst said. Morgan Stanley, Michael Wilson.

A bear market is defined as when market prices fall by 20% from a previous peak. More than 40% of the S & P 500's shares are down at least 20% this year, Wilson noted. The S & P 500 as a whole has fallen about 12% since its highest intraday level of 2,940.91 on September 28th.

More

However, "with the 12-month P / E for the S & P 500 having fallen 18% between its peak last December and its low end of October, we estimate that 90% of the damage related to the valuation of the market of the rolling are negative. complete, "Wilson said.

In recent months, "it has become obvious, even for a casual observer, that the US stock market is acting differently," he added. "Our view is that the market is detecting a profit recession and a sharp deceleration of economic growth."

<h2 class = "canvas-atom canvas-text Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = "The dips were followed by dips"data-reactid =" 40 ">The dips were followed by dips

In addition, the buy-the-dip strategy did not work this year, added Wilson, and the only years in which this strategy did not generate positive returns were market starts or declines. bearish. Even between 2008 and 2009, purchases related to market weakness proved to be profitable. Wilson attributed this situation largely to the Federal Reserve's easing and support efforts in the form of the Troubled Asset Relief program, which have eased concerns about the economy in general. and company results.

More

Wilson added that this year, the US Federal Reserve has moved from a quantitative easing policy to a quantitative tightening, with the central bank reducing its balance sheet.

"Monetary stimulus has been removed much more deliberately than since 2004, and fiscal stimulus has peaked," Wilson said.

Wilson's bearish sentiments were echoed in Goldman Sachs' 2019 outlook report released on Sunday. Jan Hatzius, an analyst at Goldman Sachs, estimates that growth should slow down from 3.5% to 1.75% by the end of 2019. Like Wilson, Hatzius cited "the tightening of the financial situation and a fiscal stimulus decreasing "as the main slowdown.

"Our goal is that as long as we do not wait for a rewarded turnaround or the benefits of the next ear will no longer be achievable, we recommend trading as a bear market rather than a bull," said Mr. Wilson.

<p class = "canvas-atom canvas-text Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = "–"data-reactid =" 66 ">–

<p class = "canvas-atom canvas-text Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = "Emily McCormick is a journalist for Yahoo Finance. Follow her on Twitter: @emily_mcck"Data reactid =" 67 ">Emily McCormick is a journalist for Yahoo Finance. Follow her on Twitter: @emily_mcck

<p class = "canvas-atom canvas-text Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = "Follow Yahoo Finance on Twitter, Facebook, Instagram, Flipboard, LinkedInand reddit. "data-reactid =" 68 ">Follow Yahoo Finance on Twitter, Facebook, Instagram, Flipboard, LinkedInand reddit.

<p class = "canvas-atom canvas-text Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = "Read more about Emily:"data-reactid =" 69 ">Read more about Emily:

<p class = "canvas-atom canvas-text Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = "Netflix User Growth Exceeds Expectations and Stocks Peak "data-reactid =" 70 ">Netflix User Growth Exceeds Expectations and Stocks Peak

<p class = "canvas-atom canvas-text Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = "It's now a "unique chance in a lifetime" to invest in American pot companies, said an investor "data-reactid =" 71 ">It's now a "unique chance in a lifetime" to invest in American pot companies, said an investor

<p class = "canvas-atom canvas-text Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = "There are "4 obstacles" to market rights now"data-reactid =" 72 ">There are "4 obstacles" to market rights now

<p class = "canvas-atom canvas-text Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = "Ark Invest, CEO: Tesla is a replay of Apple "data-reactid =" 73 ">Ark Invest, CEO: Tesla is a replay of Apple

<p class = "canvas-atom canvas-text Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = "China's economic slowdown could be a problem for Apple "data-reactid =" 74 ">China's economic slowdown could be a problem for Apple