For the year to date through August, equity markets worldwide fell an average of 23%, with U.S. markets down an average of 10% (Standard & Poor’s). All 26 markets in developed countries were down an average of 23%, and markets in 24 of the 26 emerging countries fell an average of 18%. The Canadian Venture Composite was down 30%. Jordan (+11%) and Morocco (+10%) were the exceptions.
The entire S&P 500 dropped 13% for 2008 through the end of August, with 343 stocks declining and 153 gaining. All 10 sectors in the S&P 500 were down, with
financials (-27%) falling the most, followed by telecommunications (-22%). Consumer staples did the best, (-3.2%), followed by materials (-6.7%), consumer discretionary
(-7.4%), health care (-7.6%) and energy (-7.8%).
These results refute once again, the myth that there is safety in spreading equity capital around the world in a bear market. It also demonstrates why buying “defensive stocks” in a bear market is also a fool's play. All boats fall in bear markets. Saying you lost less of your savings than others, should be poor comfort.
But here is the next big issue that markets will have to face going forward: according to data compiled by S&P, analysts are predicting 2.4% y/y earnings growth for Q3, then a surge to a record 62% in Q4 and 27% for 2009. The probability of getting this type of record earnings growth over the next couple of quarters is low to nil in my humble view.
I accept that I don't know much about the future. All we have is common sense and rational probabilities to calculate. But with the present Price to Earnings ratio of the S&P 500 already at an extremely lofty 26 times reported profits, (highest in 5 years, third highest in history) and the “E” in that equation risking more compression over the coming months, stock prices here must be clinging to a very rickety rung of hope.
Buyers and holders beware. You buy the “long always” party line from your broker/dealer/mut fund companies at great personal risk.
Cory’s Chart Corner
- Boom-Bust repeat. History calls B.S on "it's different this time", it's always different.
h/t Jessie Felder
about 9 hours ago
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- Boom-Bust repeat. History calls B.S on "it's different this time", it's always different. h/t Jessie Felder
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