There has been a considerable amount of discussion this year about the possibility a bear market may return. Reason being, the past five years have seen an unprecedented amount of market growth with the help of low interest rates and government stimulus. From the market bottom in 2009, to a record-high this past September, the S&P 500 grew a total of 197 percent. However, the bull market is aging. Bulls average five years and two months in length and the current market now stands at five years and eight months.
Adding fuel to the fire, markets saw increased volatility last month, with more daily market changes in the first part of October than the rest of the year combined. A few key events may have had an impact. First, the Federal Open Market Committee announced it would finally end the controversial quantitative easing program. For investors, this could mean less market predictability from stimulus spending and a possible market correction. Second, the International Monetary Fund cut global growth estimates for 2014 and 2015. Decisions to cut estimates came from the Japanese “triple-dip” recession, a slowdown in Chinese growth and news that Europe teeters on the edge of a recession. The total result of these elements pushed the S&P 500 down 4 percent from its high in September.
For the month of November, and in support of current market trends, the U.S. Economic Health Index™ showed only 54 percent of U.S. sectors expanding. This is the lowest rate of expansion for the year and for the history of the index. “clearTREND® research indicates strong signs of a market correction”, says Alex Haas, advisor to private clients and retirement plans. “It seems the bull may be getting tired, or at least it needs a water break.”
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