Primarily based on 19 bear markets within the final 140 years, this is the place the present downturn might finish, says Financial institution of America

At almost the midway mark in a risky yr of buying and selling, the S&P 500 index is down, however not out to the purpose of an official bear market but.

In accordance with a broadly adopted definition, a bear market happens when a market or safety is down 20% or extra from a current excessive. The S&P 500
is off 13.5% from a January excessive of 4,796, which for now, simply means correction territory, typically outlined as a ten% drop from a current excessive. The battered Nasdaq Composite
in the meantime, is presently down 23% from a November 2021 excessive.

That S&P bear market debate is raging nonetheless, with some strategists and observers saying the S&P 500 is growling similar to a bear market ought to. Wall Avenue banks like Morgan Stanley have been saying the market is getting near that time.

Learn: A secular bear market is right here, says this cash supervisor. These are the important thing steps for buyers to take now.

However ought to the S&P 500 formally enter the bear’s lair, Financial institution of America strategists led by Michael Hartnett, have calculated simply how lengthy the ache may final. a historical past of 19 bear markets over the previous 140 years, they discovered the common value decline was 37.3% and the common length about 289 days.

Whereas “previous efficiency isn’t any information to future efficiency,” Hartnett and the crew say the present bear market would finish Oct. 19 of this yr, with the S&P 500 at 3,000 and the Nasdaq Composite at 10,000. Try their chart beneath:

BofA International Analysis

The “excellent news,” is that many shares have already reached this level. with 49% of Nasdaq constituents greater than 50% beneath their 52-week highs, and 58% of the Nasdaq greater than 37.3% down, with 77% of the index in a bear market. Extra excellent news? “Bear markets are faster than bull markets,” say the strategists.

The financial institution’s newest weekly knowledge launched on Friday, confirmed one other $3.4 billion popping out of shares, $9.1 billion from bonds and $14 billion from money. They be aware lots of these strikes have been “threat off” headed into the current Federal Reserve assembly.

Whereas the Fed tightened coverage as anticipated once more this week, uncertainty over whether or not its stance is any much less hawkish than beforehand believed, together with considerations that the central financial institution might not be capable of tighten coverage with out triggering an financial downturn, left shares dramatically weaker on Thursday, with extra promoting underneath manner on Friday.

The strategists provide up one closing factoid which will additionally give buyers some consolation. Hartnett and the crew famous that for each $100 invested in equities over the previous yr or so, solely $3 has been redeemed.

As effectively, the $1.1 trillion that has flowed into equities since January 2021 had a mean entry level of 4,274 on the S&P 500, which means these buyers are “underwater however solely considerably,” mentioned Hartnett and the crew.