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“All life is, is a series of consecutive risks joined together with hairs stood on end.” L. Ron Hubbard
Below is a snippet of commentary from today’s Morning Lineup. Start a two-week trial to Bespoke Premium to view the full report.
Hell, meet the last three weeks in the market. After hitting a record high on 2/19, the S&P 500 has seemingly done nothing but trade lower, and the Nasdaq has been even weaker. As bad as the last three weeks have been, though, they pale compared to the same three weeks five years ago. You may already be aware, but just as the S&P 500 peaked this year on 2/19, it also peaked on 2/19 of 2020, and in the three weeks that followed the 2020 peak, the S&P 500 plunged over 19%. Now, that’s bad! In the three weeks since this year’s high, the S&P 500 is ‘only’ down 8.6%.
Back then, we were dealing with fears and uncertainty of a collapse in the entire global economy from a virus we knew very little about. As much uncertainty as there is now regarding the economy and global trade relations, it’s nothing like five years ago. However, just like back in Covid when the markets started to recover once it saw that the worst fears of a complete economic catastrophe would not be realized, this episode will continue until signs emerge that a full-blown trade war won’t be realized. When we get there is anyone’s guess, but it will look obvious in hindsight.
The chart below shows the S&P 500’s rolling 15-day rate of change since 1953, with the red line showing the weakest reading of the current period which was a decline of 9.3% through 3/12. This current episode of weakness is far from the most extreme reading ever. There were much deeper drawdowns back during Covid, the Financial Crisis, and after the 1987 crash, to name a few. The current period does, however, rank in the 98th percentile relative to all other periods since 1953. Even just looking at the last ten years, there were deeper 15-day declines in 2022, 2020, late 2018, early 2016, and August 2015. While you may recall the causes behind some or most of these episodes, we would bet that the vast majority of people would not know the catalyst behind each of them off the top of their heads. The odds are (hopefully) that ten years from now, most people looking back at this decline will not remember what had the market so concerned.
This morning, market fears remain at the forefront. Both the S&P 500 and Nasdaq are set to give back about half of yesterday’s gains. Investor sentiment also remains very weak. The weekly poll from the American Association of Individual Investors (AAII) showed that bearish sentiment was above 55% for the third straight week. The only other time since 1987 that bearish sentiment was above the ‘speed limit’ was in the three weeks ending March 4, 2009.
The main economic report of the day was the February PPI, which came in weaker than expected. Despite the weaker reading, equity futures have barely budged. Perhaps recent comments from President Trump threatening 200% tariffs on all European alcohol imports are weighing more on sentiment.
