Bear Market Isn’t Done yet, Glenmede Says


  • History suggests US stocks are headed for further losses before the bear market is over, Glenmede said Monday. 
  • The current bear market looks to be about to two-thirds of the way through a typical fall. 
  • The S&P 500 has narrowed its loss for the year but equity valuations still don’t reflect growing economic difficulties.  

US stocks have trudged through the bulk of the current bear market, though not all of it, leaving equities with further downside before a new rally can be sustained, said strategists at investment and wealth management firm Glenmede. 

“While the recent spur of market rises has given hope of a potential new bull market, history suggests this rally may be due for a retreat,” Jason Pride, chief investment officer of private wealth, and Michael Reynolds, vice president of investment strategy, at Glenmede said in a note published Monday. 

History shows the average bear market since World War II has run 14 months and resulted in a 35.7% decline from a previous high, the strategists said. The current bear market has lasted about 11 months and has marked a drop of 15%, suggesting it appears to be close to two-thirds of the way through a typical decline.

“There may be further downside to the ongoing bear market, justifying a continued underweight to risk assets,” said Glenmede.

Expectations that the Federal Reserve will begin to downsize interest rate hikes alongside signs that inflation is easing have fueled the S&P 500’s 16% rise from its mid-October low of 3,491.58. But the broad-equity index still remains down 15% since the start of 2022. 

“After rebounding from the October lows, markets have returned to levels at which they command significant premiums to fair value. Even with this year’s broad decline, equity valuations still do not appear to reflect the growing difficulty in the economic environment and have yet to decline to levels seen in past recessions,” they said. 

The recent bear-market rally pushed large-cap stocks to sit near their 75th percentile, according to Glenmede’s Global Expected Returns Model. 

Economists are widely warning of an oncoming recession stemming from the Fed’s fast pace of big rate hikes this year. Policy makers battling hot inflation yanked up the fed funds rate from zero percent to a range of 3.75% to 4%. The Federal Open Markets Committee is expected to deliver its sixth rate hike of 2022 later this month but to slow the pace to 50 basis points. 


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