September stock slump shows bear market’s staying power
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After clawing to within 5% of a new record high, much of the S&P 500's 2023 gains have melted away over the last few months.
Why it matters: Touching a new high is the traditional confirmation that stocks are officially in a new bull market.
Context: The market staged a remarkable rally after it bottomed almost a year ago, on Oct. 12.
- Stocks started to rise as inflation reports showed a welcome slowdown in price increases.
- Falling inflation led to a tumble in long-term interest rates, as investors bet the Fed might ease its tough monetary policy. (Lower long-term interest rates tend to boost the stock market.)
By the numbers: The S&P 500 soared nearly 30% between October and July.
- The tech-heavy Nasdaq jumped nearly 40%.
- That led some the declare that happy days were here again and that a new bull market had begun. (Your humble Axios scribe was reluctant to agree.)
Yes, but: That was then. Since the end of June, inflation — like Monty Python's proverbial plague victim — has shown it isn't quite dead yet.
- Oil prices have jumped — thanks to Saudi Arabia and Russia cutting production.
- Home prices have resumed their upward climb.
- And the economy has stayed pretty strong, causing many to re-think their views that a near-term recession would eventually lead to rate cuts.
The impact: Long-term interest rates are now the highest in 16 years — and stocks don't like it.
- With one trading day remaining, the S&P has shed more than 4.6%, this month, in its second straight monthly decline. It was its worst month of the year.
- The benchmark index, which in late July was up nearly 20% for the year, is now looking at gains of just 12%.
The bottom line: The "new bull market" may just be a bear market rally.
