Despite Rally, Hype, and NIRP, Bear Markets Hound the Globe

Sunday, May 22, 2016
By Paul Martin

by Wolf Richter
WolfStreet.com
May 22, 2016

Even in the US.

The global stock market rally since mid-February has allowed stocks to recover at a blistering pace, or so it seems. And you’d think from all the hype that the bear-market episode is behind us.

By Friday afternoon, the Dow was just 4.6% below its all-time high, set a year ago, and the S&P 500 only 3.9%. On Friday, the S&P 500 edged back into the green year-to-date, while the Dow remains in the red. The Nasdaq is still down 8.8% from its high a year ago. But those were the cleanest dirty shirts of the major global indices.

So, now that we’re relieved the whiff of panic has blown over, it’s time to have a look again at our Bear Market Tracker, lest we think all is well in the world of equities.

Everyone defines a bear market differently. For our purposes, an index is in a bear market when it’s down 20% from its cycle high. I made one exception: the Russian RTSi in USD. Due to its stubborn predilection for falling ever lower, after brief upticks, I used its high in 2011.

In the US, small caps are still struggling mightily. The Russell 2000, which tracks them, is down an embarrassing 14.1% from its peak. Small caps tend to be on speed – on the way up and on the way down. They tend to lead the pack. But now they’re not leading the pack up. They’re not leading at all. They’re dragging behind. Something is amiss.

The Rest…HERE

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