Every market dip has eventually given way to a new booming bull market: Bob's Market Update
Channel: Payne Capital
Date: 2022-09-11

This is Bob Payne, Chief Investment Strategist with Payne Capital Management with this week's Market Update. This week on the Street of Dreams, all three major averages snapped their three-week fed-induced losing streak. The Dow rose 2.6% while the S&P 500 gained 3.65%. The tech-heavy NASDAQ composite was 4.14% higher, virtually wiping out last week's decline. Oil rallied on Friday but was down for the week and at one point this week hit its lowest price since January. On the economic data front, initial jobless claims fell to the lowest reading since May. Filings for first-time unemployment insurance totaled 222,000, below expectations of 240,000 claims.

Across the pond, the European Central Bank delivered an unprecedented 75 basis point interest rate hike and signaled further increases after inflation in the eurozone hit a new record high. Now, this increase comes just two weeks before our own Federal Reserve is poised to raise rates in the U.S. by 75 basis points for the third consecutive time. Now, some market participants had hoped that policymakers would slow the pace of their rate-hiking campaign this fall. But strong economic data and comments from our own Federal Reserve chair, Jerome Powell, who said again this week that he is strongly committed to bringing down inflation and tempered those expectations.

The last few months have been especially tough since virtually all financial assets, both stocks and bonds, are down so far for the year. And many investors, especially more recent market participants, are concerned that a market crash is on the horizon. This bear market, like all others before will come to an end. It may be soon, or it may have more time to run, but markets and investors have survived much worse conditions than what we face today. History may not repeat, but markets are made up of people, and they do. Investors do the same things over and over. Only the details differ.

If you're feeling pessimistic about the future of the market, you're not alone. Market sentiment right now is overwhelmingly negative about the economy, about the stock market, about politics, about the global geopolitical situation. However, the S&P 500 is only down 13.76% for the year, while the Dow is just down 10%. And large company value stocks are down less than five. These represent the returns of a market correction, not a market crash. A market crash is what we experienced in 2000 and 2008 when stocks dropped over 50%. Our current situation isn't unique at all. Markets have dealt with high inflation and an aggressive Fed before. There is truly nothing new under the sun or in the markets. As Wall Street legend Bob Farrell so famously said, there are no new eras. Markets have been here before. Even if today's participants haven't. The bad news is that the stock market can be unpredictable and nobody knows exactly how it will perform over the short term. There's a chance that stock prices could fall in the coming weeks or months, and a market crash is always a concern, but never a certainty.

Good news, though, is that every single market dip in history has eventually given way to a new booming bull market. In other words, every dip in history has been temporary and new highs inevitable.

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