{"id":60398,"date":"2014-09-15T23:37:48","date_gmt":"2014-09-16T03:37:48","guid":{"rendered":"http:\/\/countingpips.com\/?p=60398"},"modified":"2014-09-15T23:37:48","modified_gmt":"2014-09-16T03:37:48","slug":"theres-a-bear-market-in-stocks-and-you-didnt-even-know-it","status":"publish","type":"post","link":"https:\/\/www.investmacro.com\/forex\/2014\/09\/theres-a-bear-market-in-stocks-and-you-didnt-even-know-it\/","title":{"rendered":"There\u2019s a Bear Market in Stocks and You Didn\u2019t Even Know it"},"content":{"rendered":"
September 15, 2014<\/div>
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By MoneyMorning.com.au<\/u><\/a><\/p>\n

Despite all the bad news stories, it has been a pretty good year for stocks<\/strong><\/a>.<\/p>\n

The Aussie market is up 2.5%.<\/p>\n

The US S&P 500 index is up 7.4%.<\/p>\n

Annualise those numbers and the Australian share market<\/a> is a bit worse than average, the US market is a bit better than average.<\/p>\n

But what you probably didn’t know is that deep down, underneath the surface, stocks haven’t had as good a run as these numbers suggest.<\/p>

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In fact, for many stocks the past year has been plain awful. So awful that it’s fair to say a bear market is in full flight…<\/p>\n

Check this out from Bloomberg:<\/p>\n

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‘Beneath the U.S. stock market’s record-setting gains, trouble is brewing.<\/em><\/p>\n

‘About 47 percent of stocks in the Nasdaq Composite (CCMP) Index are down at least 20 percent from their peak in the last 12 months while more than 40 percent have fallen that much in the Russell 2000 Index and the Bloomberg IPO Index. That contrasts with the Standard & Poor’s 500 Index (SPX), which has closed at new highs 33 times in 2014 and where less than 6 percent of companies are in bear markets, data compiled by Bloomberg show.<\/em>’<\/p>\n<\/blockquote>\n

What has happened in the US market is the same as the situation in the Aussie market.<\/p>\n

For the past two years, we’ve noted that Aussie blue chip stocks<\/a> have taken off while the rest of the Aussie market (especially many small-caps…and double especially many resources small-caps) has languished in the mud.<\/p>\n

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The ‘silent crash’<\/strong><\/h2>\n<\/p>\n

About three years ago, we started writing about the ‘silent crash’.<\/p>\n

That was when we noticed that blue-chip stocks were holding up well. Meanwhile, non-blue-chip stocks weren’t doing as well.<\/p>\n

The stocks to take the biggest beating were small-caps.<\/p>\n

But few investors noticed. They were too busy checking out the great gains from blue-chip stocks.<\/p>\n

The thing is, for the most part, the market hasn’t changed. Sure, small-cap investors have had some big successes over the past two years.<\/a><\/p>\n

But it’s wrong to think that all small-cap stocks have done well, far from it. Check out this chart:<\/p>\n

\"insert<\/a>
\nSource: Google Finance<\/em>
\nClick to enlarge<\/a><\/em><\/div>\n<\/p>\n

The blue line is the Aussie S&P\/ASX 200 index. The red line is the US S&P 500 index. The yellow line is the S&P\/ASX Small Ordinaries index.<\/p>\n

You can see the results for yourself. Over the past two years, small-cap stocks have gone nowhere. By contrast, the big Aussie stock index<\/a> has gone up 34.7%.<\/p>\n

So, what does this mean?<\/p>\n

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We don’t say this lightly<\/strong><\/h2>\n<\/p>\n

In the short term at least, it means the market could be in a tough spot.<\/p>\n

If you’ve read our commentary in Money Morning<\/em> for some time, you’ll know that we’re not in the habit of scaring investors for no reason.<\/p>\n

For most of the past two years, we’ve told you to ignore every junk crash call that the mainstream has thrown at you. We were right to do that. In every case, the so-called crash alert turned out to be nothing but a blip.<\/p>\n

But when you see the cold hard reality that investors have abandoned half the market — perhaps even more than half the market — you’ve got to take note.<\/p>\n

Now, this doesn’t mean stocks are about to crash. And we’re not about to tell you to sell all your stocks. In fact, as far as investing<\/a> goes, it’s business as usual.<\/p>\n

The point we’re making today is that it’s more important than ever that you don’t over-invest in stocks. Stick to the advice we’ve given you. Make sure you have a big chunk of cash. Avoid the temptation to chase yield by ditching cash to buy too many shares.<\/p>\n

But, by the same token, you should have some exposure to dividend stocks<\/a>. How much exposure is up to you. It should be enough to make it meaningful, but not so much that it would cause you severe financial hardship if the market fell 50%.<\/p>\n

You should also own gold. Every investor should own gold. That’s especially true with the civil, political and government unrest happening around the world. Gold is the ultimate ‘survival’ asset.<\/p>\n

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Be alert, but don’t change a thing<\/strong><\/h2>\n<\/p>\n

Finally, despite everything we’ve just said, you should also own growth stocks. That includes small-cap growth stocks. For the past five years bearish investors have claimed a big crash is on the cards. It hasn’t happened yet. And there’s no guarantee it will happen.<\/p>\n

And as we mentioned in yesterday’s Money Morning<\/em>, despite all the bad news, it’s still possible to find stocks that can rack up big gains.<\/p>\n

The fact that investors have given up on half the market doesn’t mean they’ll give up the other half of the market and send stocks crashing.<\/p>\n

The alternative is that investors begin to recognise the value in the market they’ve abandoned, and so they’ll simply divert cash from overvalued stocks into undervalued stocks.<\/p>\n

Of course, anything can happen. That’s what makes the stock market<\/a> so interesting and potentially so lucrative. It would be great if we could guarantee the market will go one way or the other. But we can’t.<\/p>\n

What we can do is give you our best investment advice. That advice is the same it has been for the past six years. Invest in the best wealth-building asset around — stocks. Just don’t fall into the trap of thinking nothing can ever go wrong.<\/p>\n

We’re buying this market. And so should you. But keep one eye on the crash alert. It’s not flashing yet…but that could change if investors lose faith in the strength of the market rally.<\/p>\n

Cheers,
\n Kris+<\/a><\/strong><\/p>\n

Join Money Morning on Google+ <\/u><\/a><\/strong><\/p>\n

The post There\u2019s a Bear Market in Stocks and You Didn\u2019t Even Know it<\/a> appeared first on Stock Market News, Finance and Investments | Money Morning Australia<\/a>.<\/p>\n

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\nBy MoneyMorning.com.au<\/u><\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

By MoneyMorning.com.au Despite all the bad news stories, it has been a pretty good year for stocks. The Aussie market is up 2.5%. The US S&P 500 index is up 7.4%. Annualise those numbers and the Australian share market is a bit worse than average, the US market is a bit better than average. But […]<\/p>\n","protected":false},"author":3,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[],"tags":[],"class_list":["post-60398","post","type-post","status-publish","format-standard","hentry","no-post-thumbnail"],"_links":{"self":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts\/60398","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/comments?post=60398"}],"version-history":[{"count":0,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts\/60398\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/media?parent=60398"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/categories?post=60398"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/tags?post=60398"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}