December 27, 2021

Will 2021 Stealth Bear Market Give Way to Stealth Bull in 2022?

Many stocks have been left out of the 2021 bull market. In fact, it could be argued that there has been a stealth bear market over the past few months, apart from large cap companies offering “quality growth”. The Table looks at the proportion of stocks for a given benchmark index that are currently down 10, 20 or 25% from their 2021 highs. For example, only 11% of S&P500 stocks and 61% of NASDAQ Composite stocks are at least 25% below their 2021 highs. Yet none of the overall indexes is even 10% below their high for the year. In general, the smaller capitalization or more cyclically sensitive the stock, the more likely it is to be far below its high for the year. This is not necessarily bearish going forward. A “coiled spring” has been created in which laggards will become leaders when policy pivots as inflation and growth surprise to the downside.


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