TEXAS, USA — We have been doing some hard climbing this summer, trying to get out of the series of steep stock market falls we took in June. So, when we slid into that rough patch a couple of months ago, did we actually hit rock bottom? Or is there an even steeper plunge ahead?
That matters if you have an IRA or 401(k) nest egg that you’re trying to protect as you navigate all this.
Marketwatch just reported on a new analysis about that. First off, you might be surprised by how they started off by pointing out that the biggest owner of stocks is not all the giant corporations or the hedge fund managers who wheel and deal huge sums on Wall Street.
They report that households directly own more than half the shares in the stock market…individual people now holding on to more than $38 trillion dollars in stocks. Also surprising: Many people haven’t let go of those stocks by panic selling, even with this summer’s market plunges, and the entry into a "bear market."
That is different because the examination by Marketwatch also shows that since 2000 the two other times the market absolutely tanked, regular investors followed the trend, sold their stocks, and got out. But this time, they haven’t…yet. They used that word, writing that stocks haven’t hit a bottom ‘yet’ because households are still holding onto their investments (for now). Does that change in the months ahead? Who knows?
It’s a good idea to proceed cautiously, but one technical signal says the worst of this bear market may be over, because, on Aug. 12, the S&P 500 index closed at a level where it had recovered more than half of the losses since it started falling from its January high.
And one expert tells Reuters that since World War 2, all the times the S&P 500 has been in a bear market, but then recovered by 50%, it has never reversed course and fallen to a new low. But in some cases, stocks did fall again and test that previous low.