Yesterday’s sell off has the bulls worried. Major U.S. indexes fell about 1.5 percent. Ten of the past 12 trading sessions saw swings of 100 points or more in the Dow Jones Industrial Average.
The list of worries ranges from the strengthening dollar’s harm to U.S. earnings, the end of quantitative easing, Europe’s weakening economy and the International Monetary Fund’s reduced forecast for global growth. I am far less certain that those headlines are anything more than the excuses for the selloff, rather than the cause.
Perhaps more significant than the headlines are these facts:
• This bull market is now more than 5 1/2 years old;
• The Standard & Poor’s 500 Index hasn’t had a 10 percent pullback since October 2011;
• Small-cap stocks as measured by the Russell 2000 have fallen below their 200-day moving average for the first time since November 2012;
• Almost half of Nasdaq stocks are down 20 percent from their one-year highs, meaning they are already in a bear market;
• U.S. markets are down 3 percent from all-time highs;
What might this mean in coming months?