10/2019 KIPLINGER’S PERSONAL FINANCE 11AHEAD
FOR A BULL MARKET THAT
has kept the bear at bay
for more than a decade,
this stock market is racking
up some scary downturns.
The one that began after
Standard & Poor’s 500-stock
index hit a high in late July
saw stocks fall close to 6%
by mid August, with occa-
sional bounces depending
on the news of the day, pres-
idential tweets or interest-
rate moves.The summer swoon
still qualifies as just a
“pullback,” defined as a
drop of between 5% and
9.9% from the market’s most
recent high. But that makes
the second pullback so far
in 2019, following two full-
blown corrections—declines
of 10% to 19.9% from the
high—in 2018. Once you
get past 20%, you’re in bear
country.
Does the market’s malaisemark the end of the bull’s
run? For now, it looks like
the bull will live to fight an-
other day, but you can prob-
ably expect more pain and
certainly more volatility.
The safe havens investors
seek during times of turmoil,
such as gold and U.S. Trea-
suries, have risen in price
as stocks have convulsed
(see “Go for the Gold?” on
page 33). A sentiment survey
from the American Associ-
ation of Individual Inves-
tors found that pessimism
spiked in early August
to the highest level since
December 2018.
The culprit that keeps
knocking the wind out of
the market is the trade war
between the U.S. and China,
which, on any given day,appears either intractable
or closer to a resolution.
Although a portion of the
latest round of tariffs on
Chinese goods—mostly
consumer items—has been
delayed until December,
the reprieve is only a mod-
est positive and not an eco-
nomic game changer, say
analysts at Bank of America
Merrill Lynch. “We still
expect the trade war to last
indefinitely,” they say.
Worries about the global
economy are intensifying.
A trusted barometer f lashed
a recession warning when
yields on 10-year Treasuries
recently dipped below the
yield on two-year notes. An
inverted yield curve, as the
phenomenon is known, has
preceded each of the pastMARKET VOLATILITY:
GET USED TO IT
The summer swoon is probably not the end
of the bull market. BY ANNE KATES SMITHTOPIC ANEIL WEBB/THEISPOT.COM