There was nothing routine about the current economic and market cycle. Since Covid-19 first appeared, we’ve seen the stock market’s fastest 30% drop ever, the shortest recession, the most aggressive fiscal and monetary response, the fastest doubling of the S&P 500 from its all-time market low, and the highest inflation since Decades, the Fed’s strongest tightening move in a generation, and the worst half-year for stocks in half a century. Given all this supremacy and scarcity in the recent past, historical patterns might not seem to offer much useful wisdom about how things play out from here, as a resilient stock market and healthy employment picture compete with a strong Fed and heavily inverted Treasury yield. Curve of investor interest. However, markets are moved by unchanging human nature that drives audience psychology to interact with recurring business cycles. So historical rhythms are a lot that market traders have to work with. And bears and bulls alike have their favorite antecedents. Bears 2000-2003 The most skeptical of this rally retain the early millennium bear stage above all else in their analysis. This was a respite from a prolific, overvalued, tech-centric stock market that coincided with a relatively shallow but economic recession that caused poor accounting within US companies. The Federal Reserve was constantly raising interest rates in 2000 to curb inflation in a fully functioning economy, a similar but less dramatic version of the current arrangement. On the tactical level, technical analysts point to a pattern of very strong bear market rally that broke all the way during the S&P500’s long slide to a near 50% drop by early 2003, which ultimately provided false hope that they made a real bottom. Strong rebound in early 2001, after the S&P 500 dropped more than 25% from its March 2000 peak, gained more than 20% and recovered nearly half of the index’s total losses to that point, before rolling back to make new. its lowest level by September. Technicians have generally been on the right side of the market in recent months, and their approach to respecting the trend above all else makes them cautious and quick to recommend selling on relief rallies. Chris Veron of Strategas took a detailed look at the strong 2001 rally but is ultimately doomed to say it lacked the kind of momentum thrust and shifting sentiment that would turn the trend to the upside, and sees the current rally in a similar light. BTIG’s Jonathan Krinsky notes that any rally that reclaims more than half of the total close at the close tends to mean that the bear market is likely over. At the current setup, this could mean that the S&P is climbing another 2-3% above 4230, a close test of bear momentum. In detail, today’s conditions do not quite coincide with those of 2000-2003, of course. Stocks this time around never got too expensive and were sitting on less risky long-term gains at the peak. Currently, seven months into this market downturn, the S&P 500’s total lagging annual return over the past five, 10 and 20 years is 12.6%, 13.6% and 10.5%. These are very good gains, and investors should realize that the market has been doing well for them even after such a rough correction. After a similar period of time after the peak in 2000, S&P has delivered 21%, 19% and 17% annually over the previous 5, 10 and 20 years, making this return to middle powers that much stronger. Regardless of the early 2000s model, skeptics for now point out that the Fed’s rapid tightening cycles tend to keep stocks under pressure and that S&P 500 valuations have fallen 17.5 times above forward earnings from a brief period below 16. In While the S&P par-equal forward P/E ratio remains below 16 (high-cap stocks inflate the index multiplier), it’s hard to argue that the market is completely cheap. The experience of the first decade of the twenty-first century The current economy is seen as going through no more than a slowdown and fear of growth, but without the accumulated excesses of corporate or consumer influence and the recklessness that would lead to a bad deflation. In 2010, the economy was seen as fragile just a year or so after emerging from a traumatic shock. Stocks were stripping away a large portion of their rapid gains from the bottom of the market and investors generally believed that the Fed was cornered and would have to accept massive damage to the economy and corporate profitability to escape its predicament (deflation then, inflation now). It was also a midterm election year in which an unpopular Democratic president in his first term faces a negative swing in congressional makeup. That year, as investor concern about systemic shocks in European economies ignited, the S&P 500 fell 17% from its January peak to its lowest level in June before recovering, first in a sideways range through fall and then with a strong rally. The allure of this precedent for bulls at the moment should be pretty obvious, given the similar beats of the 2022 bar so far. Ned Davis Research maintains a “composite cycle” chart for each year, combining an annual seasonal market pattern, a four-year election cycle and a 10-year “decadal” slope. (Doesn’t everyone realize that the years ending in ‘2’ have seen a lot of significant market reversals?) So far, this year’s trajectory has generally followed the rhythm of this complex cycle – in direction and timing if not in magnitude. For what it’s worth, this framework fits in with the June 2022 market low. For separate reasons, Ed Clisold, chief US strategist at Ned Davis, has converted 5% of his model portfolio into cash stocks, taking stocks to target market weight, Which is largely based on some signs of broadening emerging on the rally from the mid-June low, noting on Tuesday, “The risk that the recent advance is just a bear market rally has not been eliminated. But… technical improvement until this The point is closer to a new cyclical bull market than a bear market rally.” These inflection points don’t become apparent until later, of course. But the June drop showed some rare extremes that showed a lackluster market of the kind that usually means a very high probability that the S&P will be higher in 12 months. Companies that missed earnings forecasts this quarter saw their shares hold up better than they did in almost any quarter, a good sign that the market has priced in a great deal of bad news. The index is now, of course, already about 13% above the oversold low in June, so that doesn’t mean the market is heading straight from here, in any way. However, the tape’s ability to gain traction on Friday after the rapid reversal selling of the very strong monthly jobs report suggests that the broad economic downturn is not a lost result, and suggests that the recent recovery has not been entirely about hopes that the Fed will be more pessimistic. . But also the plausibility of a soft economic landing.