It’s starting to feel like a bear market
No mercy for our portfolio strategy benchmarks this week
It may not be a formal bear market, at least not yet, but it’s starting to feel like one. The main clue: a clear, persistent downward trend. There are wide-ranging debates on the finer points re: defining a bear market. I’ll refrain from that mostly pointless topic. In the grand scheme of what motivates investors (and determines success or failure): trend is the only game in town, namely: Is the asset in question generally going up or down. The latter applies these days.
Consider our 16-fund opportunity set that spans global markets. Red ink dominates this week’s trading results (through Friday, Apr. 8) and for the year to date. Upside momentum, in other words, has mostly faded, as the MOM indicator reminds in the table below. For details on the metrics in the table below, see this summary.
The wild card, of course, is the Ukraine war. I suspect that absent Russia’s invasion of its neighbor there would be a lot more green on the screen for 2022 results. And if we’re feeling a bit hopeful, we might consider that if peace (or even a partial ceasefire) breaks out soon in the Ukraine-Russia conflict, markets could rediscover their bullish mojo. But that may be expecting too much, at least for the foreseeable future.
“We have seen no indication that President Putin has changed his ambition to control the whole of Ukraine and also to rewrite the international order, so we need to be prepared for the long haul,” NATO Secretary General Jens Stoltenberg said this week. “We have to be realistic and realize that this may last for a long time, for many months or even years.”
Let’s hope he’s wrong. Meantime, it seems the markets may be inclined to think he’s right. The only winner this week: commodities. WisdomTree Commodity Index (GCC) has been a bit choppy lately, but the trend still looks bullish and this week’s 0.8% increase stands out as an upside outlier.
Otherwise, markets around the world fell last week, ranging across various flavors of stocks, bonds and property shares. To be fair, there are some corners where the potential for recovery looks relatively encouraging. US real estate investment trusts (VNQ) are on this list, although it’s still premature to declare that this year’s correction has run its course.
Ditto for US stocks (VTI), which lost 1.7% this week.
There’s less debate about stocks in the Asia ex-Japan space. The trend is decidely bearish, as it has been for more than a year.
Nothing compares with the hammering in US Treasuries lately. The iShares 7-10 Year Treasuary Bond ETF (IEF) fell sharply, losing 2.3% this week and closing at its lowest level in nearly three years.
This week’s deepest loss for our 16-fund opportunity set: US small-cap stocks. But while iShares Core S&P SMall-Cap ETF (IJR) tumbled a hefty 4.4% — its biggest weekly setback since January — the fund has been more or less stable this year. It’s too early to favor overweighting small caps, but perhaps the flatlining for over a year is a clue that the crowd is poised to run these shares higher at some point, when a reasonable (as-yet unknown) excuse emerges.
No mercy for our portfolio strategy benchmarks this week. Red ink dominated, with Global Beta 16 (G.B16) taking the biggest hit: down a hefty 2.0%. Ouch! For details on the benchmark designs, see this summary.
Meanwhile, the equal-weighted mix of global stocks, bonds, property shares (G.B5.ew) and commodities continues to outperform. Although it lost a relatively modest 0.9% this week, it’s the only strategy benchmark on our list that’s posting a gain year to date. ■