Loading ...The Probability of a New Bear Market is Rising
BEAR SIGHTING?
The probability of a new bear market is rising.
Now that data from May have been finalized, the Bear Market Probability model has risen to its highest level since January 2020.
When the model is above this threshold, the S&P 500 has returned an annualized +3.4%. That’s not disastrous, but it’s well below average and only a sixth of the return when the probability is below 40%.
Bear Market Probability is our version of a model outlined by Goldman Sachs using five fundamental inputs. Each month’s reading is ranked versus all other historical readings and assigned a score. The higher the score, the higher the probability of a bear market in the months ahead.
When we looked at this last March, we saw that it would plunge below 40%. While it was way too early in 2008, the other signals all preceded gains, and it added another win over the past year.
The past year is the fastest that Bear Market Probability has cycled from one extreme to the other.