The bull market is a lot longer in the tooth than it was back in 2011-12, and stock valuations and investor expectations are considerably higher. But we’re still not seeing enough of the classic warning signs in the economy and stock market to indicate the bear has arrived.
My partner Elliott Gue has compiled a list of 10 indicators that have heralded every bear market since 1937. The definition of a bear market is a decline of 20 percent or greater from a closing high in the S&P 500. This has happened 12 times with an average drop of 35.5 percent over 14 months.
Clearly those were times when you’d have wanted a goodly portion of your assets in cash, if for no other reason than to buy very low near the eventual bottom. But such drops have only occurred when at least 8 of Elliott’s bear market warning signs have flashed red.
That’s not the case today. In fact, some of the indicators are clearly still flashing bright green, including the Conference Board’s Leading Economic Index (LEI).
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