The Bear Market Just Started | PREPARE

The bear market is officially here – here is why:
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WHY IS THE MARKET FALLING?
Two main reasons. Reason number 1: Jerome Powell just announced this week that he is committed to increasing our interest rates at half a percent for the rest of the year which is the fastest pace since 1994.

Reason number 2: a few stocks dragged the entire market down which usually doesn’t happen but it did this time – and that stock was Target – here’s why it did that. Investors thought Target was going to earn $3.07 per share – this is called the EPS which was roughly a 20% drop. But as soon as they released earnings – we found it it was a lot worse because their actual EPS was $2.19 which was a 41% drop – twice as bad as we thought. To make matters worse – the day before – Walmart came out with their numbers and it was also pretty bad.

WHO CARES ABOUT TARGET AND WALMART?
Because Walmart and Target is the shopping home of America so if those two retail giants are struggling – we are in trouble because that means everyone is else is also going to struggle as well.

Both Target and Walmart blamed inflation for their decreased profit margins – they cited higher fuel costs, higher costs from their suppliers, and higher costs for labor.

ARE WE GOING INTO A RECESSION?
It’s not guaranteed but investors are worried these retail giants could represent a larger problem. Since our first quarter GDP was already negative. If we follow that up with another one quarter of negative GDP – then it’s official.

WHAT’S GOING TO HAPPEN TO THE STOCK MARKET?
Here’s a really interesting analysis from Canaccord Genuity (https://bit.ly/3NocCgw) of the past 12 bear markets that we’ve had since World War II – the majority of them – 9 out of 12 have went down at least 25% from their all time highs. Three of those bear markets were really bad which was in 1973, the year 2000, and 2007 when the market fell more than 40%.

The average decline from the top to the bottom or “peak to trough” as the official terminology is – was actually 38%. But if we exclude the big drops of 40%+ from 1973, 2000, and 2007 – the actual average decline was 31% so that’s what we can expect and that’s why so many analysts are preparing for a drop of something like 30% but so far we’re down 18% which means we have potentially another 13 % drop to go so expect a little more pain ahead if history repeats itself.

BE CAREFUL OF “RELIEF RALLIES”
These tend to happen after the market loses 20% from its peak and on average have lasted roughly 2 months. They get investors excited because people think maybe the market is coming back up – but then the stock market starts to fall again and if that’s the case – this will last until the start of the second quarter earnings season.

HAS THE MARKET REACHED THE BOTTOM YET?
There’s a way to figure out when we’re close – watch the video to find out!

SOURCES:
https://www.investors.com/news/retail-stocks-target-walmart-earnings/
https://www.barrons.com/articles/sp500-bear-market-last-history-51652913257?refsec=markets&mod=topics_markets

*None of this is meant to be construed as investment advice, it’s for entertainment purposes only. Links above include affiliate commission or referrals. I’m part of an affiliate network and I receive compensation from partnering websites. The video is accurate as of the posting date but may not be accurate in the future.

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