March 2, 2020

I’ve been suggesting for a long time that the bear market is coming. It may already be here.

Either way, the case for a stock market slowdown has never been stronger. Yet, stocks kept screaming higher at the beginning of this year, continuing last year’s huge growth.

Some of it boggles the mind.

I think much of 2019’s frenzy was speculation. Frankly, the market performance wasn’t fully supported by macro indicators, equity fundamentals, or technicals.

And in business, there are cycles. In other words, sometimes things go down.

That’s why it’s important to be aware of the gravity of the situation today. Nobody predicted the coronavirus outbreak from Wuhan, China, that’s causing the COVID-19 disease. Yet, it could be a catalyst to bring the market down after trading at astronomical levels during a record, decades-long expansion.

The price behavior we’re seeing almost always happens at business cycle peaks or the start of post-bear recoveries. And all signs point to us currently being at the top of a business cycle, not the bottom. As such, strong similarities exist between now and the 2000 tech bubble, outside Utilities (see below from Crescat Capital).

Look further at those historical percentiles! How can we not be headed for a bear market?