THOSE WHO PREFER A STATE OF WORRY- STOP HERE!
by Jason Bodner
October 25, 2022
My wife asked me the other day if I want to do a home-DNA test. She said that we could find out if we are predisposed to developing diseases like Alzheimer’s.
“No thanks,” I said. “If I find out now, I’ll just spend my remaining years with even more to worry about.”
She looked at me like I had three heads, but my point was this: Sometimes ignorance CAN BE bliss.
Worrying is usually worse than suffering from that which we worry about. For example, a simple scan of mental health sites tells you that the short-term effects of anxiety on the body can include the following:
- Shaking
- Fatigue
- Dizziness
- Muscle aches
- Upset stomach
- Heart palpitations
- Breathing problems
- Increased blood pressure
Long-term effects of anxiety can include:
- Memory problems
- Frequent migraines
- Heart problems and risk of heart disease
- Various illnesses from a lowered immune system
- Gastrointestinal disorders, including irritable bowel syndrome
- Depression and even suicidal thoughts
No thanks to all that stuff! I won’t be spending the rest of my time on this earth worrying. I’m 100% certain that on my deathbed, if I’m lucid enough to reflect, I won’t wish I spent more time worrying.
I’m saying this because the market is saturated with bad news and worry. But when I wear my data-colored glasses, I see some very positive signs. The pain is usually short-term, folks, and the horizon looks glorious. It just depends on your time horizon and how you choose to view life.
First, let’s talk about this bear market. First, let’s just all agree that the whole year of 2022 stank. The trip from NASDAQ’s November peak to June was equally miserable, so let’s define the historical “bear”:
According to Investopedia:
- Bear markets are defined as sustained periods of downward trending stock prices, often triggered by a 20% decline from near-term highs.
- Of the 25 bear markets that have occurred since 1928, fourteen (56%) have also seen recessions while eleven have not (44%).
- To date, the deepest and most prolonged bear market was the 1929-1932 slump (-89% in the Dow), which marked the start of the Great Depression.
- A recession is defined as a period of temporary economic decline during which trade and industrial activity are reduced, generally identified by a fall in GDP in two successive quarters.
That’s the bad news. Here’s the good news (and there’s a lot more, just like this):
- By most metrics, we are not yet in a recession. At minimum: it’s open for debate. This bear market is more fear of a recession. The worry is usually worse than the thing we worry about.
- Bear markets are significantly shorter and smaller than bull markets. Just look at the following chart of bull and bear markets with their associated returns and duration:
Invesco
Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.
- Even including the 12-year Great Depression, of the last 95 years, bear markets comprised only 20.6 years. The table below shows all bear markets since January 1927. Bear markets occupy only 21.5% of history. In other words, stocks rise 78.5% of the time (7,514 out of 34,992 days):
Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.
You may say: “That’s nice, but it hurts now.” True, but a couple of new signals are very bullish.
- The QQQ (the NASDAQ tracking ETF) recently had closes of -3% and +3.3% consecutively:
Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.
QQQ began trading March 10th, 1999 (5,942 trading days). On any given day we expect the QQQ to rise 0.06%, based on past averages, but the absolute average daily move (negative or positive) is 0.96%.
A move of ± 3% is 3X higher than the daily average. In statistics, three times normal is a lot. So, a 3% move on NASDAQ is unusual. In fact, the QQQ posted a one day move of 3% or more 483 times: only 8.1% of history. But consecutive days of moves of 3% or more – like 10/14 and 10/17, are ultra-rare! That has only happened 210 days out of 5,942 (3.5% of history). Some consecutive days are more than two days in a row. Like, during the pandemic in March of 2020, the QQQ posted 8 consecutive days of ± 3%:
Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.
When we take periods of consecutive ± 3% days, we get 87 (only 1.5% of history). So, the recent up-down is in fact – incredibly rare, but forward returns from ultra-rare instances weren’t great at first…
Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.
But that is not a true representation of the modern stock market. That’s because 61.5% of instances occurred prior to October 2002. I included them for objectivity, but once the Internet bubble burst, then we faced 9/11 and accounting scandals and a serious turn-of-the-century financial crisis.
What happens when we strip out that unusual early time and measure 20 years from October of 2002?
Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.
This is a much more accurate representation of a “normal” modern market. Remember: this still includes the Great Financial Crisis, the COVID-19 pandemic, and all the other minor scares along the way such as the Greek debt crisis, Ebola, the 2014 Ukraine invasion, etc. Average positive returns weren’t just skewed by rogue big returns, either. Here is how often each of the 31 periods observed produced positive returns:
Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.
Now, here’s the second big new development:
- The Big Money Index (BMI) went oversold for the 4th time this year – the most since 2008:
Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.
For the 25 days of September 13th to October 17th, only 8.5% of our signals were buys. Historically that’s extremely low, usually indicating capitulation when everyone is selling.
Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.
Since 1990 (MAPsignals data start), there were 137 times below 8.5% buy signals. The forward results are incredibly bullish and the number of positive instances afterwards were shockingly high, up to 100%:
Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.
These new POWER signals – the ultra-rare ± 3% consecutive days in the QQQ and the rare 25-day sub-8.5% buy threshold – both just happened. And both are incredibly bullish!
So why all the worry? Because bear markets are real, and they suck – but for only 21% of the time. If life is great nearly 80% of the time, that sounds pretty good to me! And this history suggests that you should cheer up, because the odds are very strong for higher prices, with near certainty 12-24-months from now.
Remember: “Don’t worry about the world coming to an end today. It is already tomorrow in Australia.”
–Charles M. Schulz
All content above represents the opinion of Jason Bodner of Navellier & Associates, Inc.
Also In This Issue
A Look Ahead by Louis Navellier
Don’t Just Complain About Higher Prices – Invest with Inflation in Mind
Income Mail by Bryan Perry
Recent Market Action Hints of Peak Inflation
Growth Mail by Gary Alexander
October – Where Bear Markets Go to Die
Global Mail by Ivan Martchev
The Stock Market Bottom is a Definite “Maybe”
Sector Spotlight by Jason Bodner
WARNING!!! THE FOLLOWING MAY RELIEVE ANXIETY!
View Full Archive
Read Past Issues Here
Jason Bodner
MARKETMAIL EDITOR FOR SECTOR SPOTLIGHT
Jason Bodner writes Sector Spotlight in the weekly Marketmail publication and has authored several white papers for the company. He is also Co-Founder of Macro Analytics for Professionals which produces proprietary equity accumulation/distribution research for its clients. Previously, Mr. Bodner served as Director of European Equity Derivatives for Cantor Fitzgerald Europe in London, then moved to the role of Head of Equity Derivatives North America for the same company in New York. He also served as S.V.P. Equity Derivatives for Jefferies, LLC. He received a B.S. in business administration in 1996, with honors, from Skidmore College as a member of the Periclean Honors Society. All content of “Sector Spotlight” represents the opinion of Jason Bodner
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