The S&P 500 index suffered another rough month as inflation data remained hot and the invasion of Ukraine took center stage. The S&P fell -3.15% in February and has now lost over -8% since the beginning of 2022, marking the deepest two-month decline since March 2020.
While financial analysts and experts had warned of more volatility in the first part of this year, this slow burn of losses has lasted longer than some initially thought. It was expected to be more of a yoyo market than one that consistently trends lower. It’s safe to say markets are in the middle of uncertain times, for all the obvious reasons and during periods of turmoil, risk appetite naturally declines. So, is it any wonder that many investors are calling for a “bear market”?
I do not have a crystal ball and say for sure where we are in the economic cycle, one thing that I can emphatically state is that markets do not bottom on good news; they bottom on bad news. In this context, the bottom is when stocks favorably respond to negative events, despite the feeling of doom and gloom. In fact, it is the view of some that the bottom for 2022 was set on 2/24 when the S&P 500 index was at 4,115. Despite continuing fallout from Russia-Ukraine war, markets are still holding above those 2/24 lows, which is an encouraging sign.
Additionally, with the bad returns as of late, the chances of multiple interest rate hikes in March have collapsed. This too can be viewed as a positive (or DOVISH) pivot for stocks. Lastly, looking at recent airline travel measured by TSA checkpoint throughput, 2022 has been tracking at the highest levels since pre-pandemic but STILL has not caught back up to 2019 levels due to things like minimal business travel and fearful individuals. So as the restrictive COVID-19 mandates ease in the workplace and general comfortability with the coronavirus increases, there is still upside for economic growth and a further rebound. For all these reasons mentioned, I believe the bear market has yet to arrive.