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After the dot com bubble burst in early 2000, the stock market entered into a multi-year bear market. Not only was the bear market brutal from a duration and magnitude standpoint, it was not a smooth downward trend either. Because of the vicious countertrend “bear market” rallies, the market was difficult to short and even more difficult to find a bottom.
During the 2000-2003 bear market, the Dow Jones mounted three significant rallies that ultimately failed prior to the market bottoming. Below, the rallies 2000-2003 Dow rallies are illustrated on the SPDR Dow Jones ETF:
Is 2023 Setting Up for a Repeat?
The war in Ukraine drags on, inflation is stubbornly high, and equities gave up gains in February to finish lower. For these reasons, even after the rally the U.S. equity market has had off the lows so far in 2023, many investors are still on guard.
However, below, we will list 6 pieces of evidence as to why this time is different, including:
1. Fed Pivot Potential: While the Fed has remained hawkish, U.S. investment banks believe the Fed may pivot at some point. For example, Morgan Stanley is in the camp that the Fed may cut rates in December of 2023 (and slow rate hikes before that). The Fed controls the market’s liquidity and is the most vital factor to follow.
2. 200-day Moving Average Historical Evidence: The S&P 500 Index has exceeded its 200-day moving average for more than 25 days. Over the past 73 years, the index has never reached bear market territory (20% correction off highs), cleared the 200-day for this amount of time, and made fresh lows.
3. Entering a Seasonally Strong Period: Equity markets are entering the strongest quarter of the four-year presidential cycle.
4. Positive Earnings Reactions Are Becoming Common: Despite the market pullback early on Wednesday, several stocks shot higher on massive volume after strong earnings reports, including First Solar.
Nvidia, which gapped up on earnings last week, barely budged on Wednesday after the company announced a $10 billion mixed securities shelf offering Tuesday night – a bullish sign.
5. The “Wall of Worry is Back”: Seldom does the market crash when the crowd expects it. After a small pullback in February, the number of bulls (38.4%) in the Investor’s Intelligence Survey hit their lowest levels of the year.
6. International Strength has Arrived: We live in a world economy now. As such, it is a bullish sign to see strength in world markets. The iShares MSCI EAFE ETF, which tracks a mix of mid to large-cap equities in developed markets, is trending higher and has retaken its 200-day moving average. China, the world’s largest economic influence outside the United States, is reopening after covid lockdowns. Meanwhile, Latin American countries such as Mexico and Argentina show surprising strength.
Takeaway
The weight of evidence suggests that the market is not heading for another 2000 rewind. Unfortunately, there are no certainties in the market. However, investors must play the odds. Regardless, if you keep an open mind, manage risk, and stay flexible; in the long run you will achieve strong investing results no matter what.
Why Haven’t You Looked at Zacks' Top Stocks?
Since 2000, our top stock-picking strategies have blown away the S&P's +6.2 average gain per year. Amazingly, they soared with average gains of +46.4%, +49.5% and +55.2% per year. Today you can access their live picks without cost or obligation.
Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance for information about the performance numbers displayed in this press release.
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Zacks Investment Ideas feature highlights: SPDR Dow Jones ETF, Morgan Stanley, First Solar, Nvidia and iShares MSCI EAFE ETF
For Immediate Release
Chicago, IL – March 3, 2023 – Today, Zacks Investment Ideas feature highlights SPDR Dow Jones ETF (DIA - Free Report) , Morgan Stanley (MS - Free Report) , First Solar (FSLR - Free Report) , Nvidia (NVDA - Free Report) and iShares MSCI EAFE ETF (EFA - Free Report) .
2000 Rewind? 6 Reasons This Time Is Different
The 3 Brutal Bear Rallies of 2000-2003
After the dot com bubble burst in early 2000, the stock market entered into a multi-year bear market. Not only was the bear market brutal from a duration and magnitude standpoint, it was not a smooth downward trend either. Because of the vicious countertrend “bear market” rallies, the market was difficult to short and even more difficult to find a bottom.
During the 2000-2003 bear market, the Dow Jones mounted three significant rallies that ultimately failed prior to the market bottoming. Below, the rallies 2000-2003 Dow rallies are illustrated on the SPDR Dow Jones ETF:
Is 2023 Setting Up for a Repeat?
The war in Ukraine drags on, inflation is stubbornly high, and equities gave up gains in February to finish lower. For these reasons, even after the rally the U.S. equity market has had off the lows so far in 2023, many investors are still on guard.
However, below, we will list 6 pieces of evidence as to why this time is different, including:
1. Fed Pivot Potential: While the Fed has remained hawkish, U.S. investment banks believe the Fed may pivot at some point. For example, Morgan Stanley is in the camp that the Fed may cut rates in December of 2023 (and slow rate hikes before that). The Fed controls the market’s liquidity and is the most vital factor to follow.
2. 200-day Moving Average Historical Evidence: The S&P 500 Index has exceeded its 200-day moving average for more than 25 days. Over the past 73 years, the index has never reached bear market territory (20% correction off highs), cleared the 200-day for this amount of time, and made fresh lows.
3. Entering a Seasonally Strong Period: Equity markets are entering the strongest quarter of the four-year presidential cycle.
4. Positive Earnings Reactions Are Becoming Common: Despite the market pullback early on Wednesday, several stocks shot higher on massive volume after strong earnings reports, including First Solar.
Nvidia, which gapped up on earnings last week, barely budged on Wednesday after the company announced a $10 billion mixed securities shelf offering Tuesday night – a bullish sign.
5. The “Wall of Worry is Back”: Seldom does the market crash when the crowd expects it. After a small pullback in February, the number of bulls (38.4%) in the Investor’s Intelligence Survey hit their lowest levels of the year.
6. International Strength has Arrived: We live in a world economy now. As such, it is a bullish sign to see strength in world markets. The iShares MSCI EAFE ETF, which tracks a mix of mid to large-cap equities in developed markets, is trending higher and has retaken its 200-day moving average. China, the world’s largest economic influence outside the United States, is reopening after covid lockdowns. Meanwhile, Latin American countries such as Mexico and Argentina show surprising strength.
Takeaway
The weight of evidence suggests that the market is not heading for another 2000 rewind. Unfortunately, there are no certainties in the market. However, investors must play the odds. Regardless, if you keep an open mind, manage risk, and stay flexible; in the long run you will achieve strong investing results no matter what.
Why Haven’t You Looked at Zacks' Top Stocks?
Since 2000, our top stock-picking strategies have blown away the S&P's +6.2 average gain per year. Amazingly, they soared with average gains of +46.4%, +49.5% and +55.2% per year. Today you can access their live picks without cost or obligation.
See Stocks Free >>
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Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance for information about the performance numbers displayed in this press release.