Resetting Expectations
Investors,
Welcome to the bear market.
While we can debate about how long we’re going to stay in this kind of market environment, there’s no debate about what kind of market environment we’re in.
We are in a bear market.
I’ve spent the past 7 weeks outlining the incremental changes to my expectations, shifting from outright bullish to cautiously optimistic, to defensive, to outright bearish.
So here we are.
The S&P 500 just suffered its worst week since March 2020 and October 2008.
I did my best to read the tea leaves, but I didn’t expect this much pain, so fast.
On February 23, I wrote “Am I Bearish?” and told premium members how I was using new market data to adjust my portfolio strategy, shifting into a “do no harm” stance.
The strategy was simple:
Step 1: pause all purchases of stocks.
Step 2: sell all recently acquired stocks.
Step 3: allocate cash into UTWO, UTEN, TLT.
These actions helped, but haven’t made me immune to the pain.
At the very least, they’ve reduced the pain and allowed me to do exactly what I intended — do no additional harm.
The stocks that I sold have fallen anywhere from -10% to -30% since I exited them.
The Treasury ETFs that I bought are up and have reduced portfolio volatility.
And yet, this wasn’t enough.
The Nasdaq Composite Index ($IXIC) fell -11.44% in two trading days.
How rare is this?
Since the Nasdaq Composite was created in 1971, it’s only fallen this much in:
October 1987
April 2000
October 2008
March 2020
That’s it.
That’s the list.
Think about that… there have only been 8 other trading days (4 periods of 2-day trading windows) out of 13,611 total trading days since the start of 1971 with equal or worse returns than the past 2 trading days.
The probability of this happening, before this week, was 0.058% (or roughly 1 in 1,700).
Yes, that’s roughly one-half of one-tenth of one percent.
When I said that we are unequivocally in a bear market, I want you to think about the four other dates mentioned above — all of them occurred near the start or in the depths of a bear market.
So, you don’t have to like it… but we are in a bear market.
And now we need to reset our expectations and think critically about how to endure.
The intention of this report is to explore this topic.
Specifically, I’ll be sharing three original studies that are flashing rare signals, in addition to one other study that a highly respected analyst shared on X.
Let’s begin.