Things continued to deteriorate this month on top of the pain already endured this year.
Looking at the formerly high-flying “FAANGs"—they’ve all been crushed:
Facebook - down 62% YTD Amazon - down 38% YTD Apple - down 24% YTD Netflix - down 60% YTD Google - down 34% YTD
Indeed, the most reliable stalwart of the group, Apple, is down 8% in the last few days and appears to be giving up the ghost.
The overall market is not much better, of course, with the S&P 500 down 26% from it’s high (but still has a PE of 18.12), and 10% of that damage (about 40% of this year’s loss) came in the last month alone.
Is this the bottom? I don’t think so. So where is the bottom?
Earlier this month the likes of my two favorites “Arts” (Art Cashin and Art Hogan) said the “lows are in for 2022." Not surprisingly, Jim Cramer, whom I don’t respect but who is a good barometer of what others seem to think, said the same thing.
They were all wrong. [Note, Cramer’s opinions change as quickly as a teenager’s mood; he’s singing a new tune today.]
Others were less sanguine.
Peter Bookcvar, Dan Niles, and Jeffrey Gundlach all said we'll see the S&P hit 3,000 (which, Bookcvar says, is a PE of 15 at current expectations). Niles thinks that happens in 2023 and Gundalch thinks it happens by mid-October, 2022. If that occurred, it would mean the S&P would be down 38% off its high, which is on par for a typical bear market.
I am far less prescient than those guys, but I also think anywhere in the range of 3,000 to 3,400 is a likely bottom for this cycle; provided, however, there's no “black swan” type of event, such as Russia launching tactical nukes or surprise Fed pivot.
I also agree with the CEO of FedEx who expects a worldwide recession in 2023. But, the thing to remember with the stock market is that it is forward-looking and labels like “recession” are, at best, contemporaneous or backward-looking labels. So, if a recession next year is likely (as I believe) I’d expect to see that show up in stock market price compression at least 6 months in advance …
What does all that mean? I think it means we see the market bottom soon (within the next 6 months), and we’re not there yet. |