Daily Traders Edge

History suggests strong economy can ward off bear market

February 13
09:53 2018

Faith in the economy is reason to think this current stock market correction is unlikely to deepen into a full-blown bear market.

That is the read of stock market strategists and other market watchers looking at past pullbacks of at least 10 percent on the S&P 500 .SPX and whether the benchmark index is likely to extend its decline to 20 percent, or bear market territory.

The S&P confirmed it had entered correction territory last Thursday, when it closed down 10.2 percent from its Jan. 26 high. Stocks have rebounded sharply in the two sessions since then, posting their biggest two-day percentage gain since June 2016 and cutting the decline to 7.6 percent as of Monday close.

While not discounting the possibility that stocks could renew their slide, market strategists said the shaky economic conditions that tend to presage a bear market were absent.

“We just don’t see a bear market starting with the economy as strong as it is,” said Ryan Detrick, senior market strategist at LPL Financial in Charlotte, North Carolina. “You rarely see bear markets during a non-recessionary environment.”

Continue Reading at Reuters

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