Based on 19 bear markets over the past 140 years, this is where the current recession may end, says Bank of America

Nearly halfway through a volatile year of trading, the S&P 500 Index is down, but has yet to reach the point of an official bear market.

According to a widely followed definition, a bear market occurs when a market or stock falls 20% or more from a recent high. The S&P 500SPX,
-0.57%
it’s down 13.5% from a January high of 4796, which for now just means correction territory, often defined as a 10% drop from a recent high. The battered Nasdaq Composite COMP,
-1.40%,
meanwhile, it is currently 23% below the November 2021 high.

Still, the S&P bear market debate is on, with some strategists and observers saying the S&P 500 is growling like a bear market should. Wall Street banks like Morgan Stanley have been saying the market is getting closer to that point.

Read: A secular bear market is here, says this money manager. These are the key steps investors need to take now.

But if the S&P 500 were to officially enter the bear’s den, strategists at Bank of America led by Michael Hartnett have calculated how long the pain might last. Looking at a history of 19 bear markets over the last 140 years, they found that the average price drop was 37.3% and the average duration about 289 days.

While “past performance is no guide to future performance,” Hartnett and team say the current bear market would end on October 19 of this year, with the S&P 500 at 3,000 and the Nasdaq Composite at 10,000. Take a look at his graph below:

BofA Global Research

The “good news” is that many stocks have already reached this point. with 49% of Nasdaq constituents more than 50% below their 52-week highs, and 58% of the Nasdaq more than 37.3% below, with 77% of the index in a bear market. More good news? “Bear markets are faster than bull markets,” say strategists.

The bank’s latest weekly data, released Friday, showed another $3.4 billion in stocks, $9.1 billion in bonds and $14 billion in cash. They note that many of those moves were “risk-free” ahead of the recent Federal Reserve meeting.

While the Fed tightened policy again as expected this week, uncertainty over whether its stance is less hawkish than previously believed, coupled with concerns that the central bank may not be able to tighten policy without triggering an economic downturn , left stocks dramatically weaker on Thursday. , with more sales underway on Friday.

Strategists offer a final fact that may also give investors some comfort. Hartnett and the team noted that for every $100 invested in stocks over the past year, only $3 has been redeemed.

Additionally, the $1.1 trillion invested in stocks since January 2021 had an average entry point of 4,274 into the S&P 500, meaning those investors are “underwater, but only a little bit,” they said. Hartnett and team.

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