Marc Lichtenfeld: There are a lot of scared investors out there right now. After what seemed like five years of stocks doing nothing but rising, investors are worried after the latest drop. Last week I spoke at the World Money Show in Orlando. After my presentation, I had lively conversations with many of the attendees. And let me tell you, some of them were plain freaking out.
At that point, the market was down a little more than 4% from its all-time high.
Let me repeat that just so you can appreciate how silly it sounds. Investors were freaking out after the market dropped 4% from its all-time high.
That doesn’t mean the market can’t drop further, or even become a real correction. I can’t tell you definitively that it will or won’t. I decided against the premium package for my crystal ball so I only get information on specific stocks, not the broad market.
But let’s take a look at a few factors that suggest that we likely have not entered the next bear market.
The initial drop was too big. Bear markets typically don’t begin with big scary drops like the ones we’ve had the past month. As of the close on Monday, since hitting a high on January 15, the S&P 500 dropped about 5.25%. Such a hasty move is more correlated with bull markets than bear markets. Down days in bull markets tend to be more violent than in bear markets. Usually, a bear market will just grind you down, not scare the pants off you.
Where’s the euphoria? I’d be more worried if the investors I spoke with last week all told me they were using the