The Fastest-Ever Bear Market Leaves Stock Traders No Road Map

(Bloomberg Businessweek) -- Welcome to the fastest-ever bear market. It broke out smack at a market top, something that almost never happens. As shocking as the 2008 financial crisis and crash of 1987 obviously were, both followed months of downward drift—though that was only visible in retrospect.

In just four weeks, U.S. stocks have already completed the 30% plunge that matches the median loss of the last 10 bear markets. The median time it took the earlier episodes to lumber to the bottom? One and a half years. Now that they’ve woken up, investors are preparing for the worst. Recession fears are running high, and traders are slamming the sell button. “It’s bad,” says Jeffrey Kleintop, chief global investment strategist for Charles Schwab & Co., “but too early to tell the size.”

At its worst point during the sell-off, more than $10 trillion of equity value was erased, wiping out three years of gains. Price swings exploded. The Cboe Volatility Index, a measure of the cost of S&P 500 options that’s used as a gauge of market anxiety, jumped to a record high, exceeding levels seen during the dark days of the financial crisis.

Traders have precious little data to go on. Many companies have warned about weaker profits, but few have offered specifics. With the first-quarter reporting season weeks away, investors will have to wait until April for a tally of the damage. The lack of clarity begets more selling. According to Bank of America Corp.’s latest monthly survey, money managers are cutting equity exposure at the fastest pace since at least 2001.

There have been glimmers of hope: In two recent sessions, vows of fiscal stimulus from the U.S. government gave stocks a bounce. But Tony Dwyer, who’s paid to handicap equities as chief market strategist at Canaccord Genuity LLC, says for now he’s stopped making market forecasts. He suspended his yearend target for the S&P 500, saying the virus and the government’s response to it have made things too unpredictable. “This unknown element is something people just aren’t used to,” says JJ Kinahan, chief market strategist at TD Ameritrade in Chicago. “Unless somebody has a crystal ball that I’m unaware of, and they’re like, ‘OK, I know exactly when this is going to turn and what it means for earnings,’ how can you model it out?”

©2020 Bloomberg L.P.