Lead-Lag Live: The Bear Market Ain’t Over

Markets never move in a straight line. Even the market’s decline in the first half of 2022 was marked by a number of days with strong rallies. Now, with markets trending higher in the past few weeks, it may seem like the worst is over.

However, bear markets take time to play out. And they will often recover a significant amount of their prior losses before making new lows along the way. What should investors look for?

Investors are currently looking at the strong rally in a number of stocks over the past few weeks, including a few risky assets like cryptocurrencies that may have more than doubled off their lows.

But some indicators show trouble ahead. Investment drawdowns indicate that there’s usually a big shift towards US Treasuries.

This year, thanks to rising interest rates, those assets have declined along with stocks. That could be an indication that we haven’t seen a full “risk off” market yet, so much as a cooldown from high valuations.

Ultimately, the current markets come down to the Fed’s actions. With interest rates significantly rising, markets should be showing more trouble. But failing to raise rates with today’s inflation also makes for some trouble.

Chances are there will be some policy error on the Fed’s part that could lead to another market decline.

To listen to the full interview and hear other key indicators to watch now, click here.