by Charles Hugh Smith
Of Two Minds
Everyone with any position in today’s market will be able to say they lived through a real Bear Market.
In the echo chamber of a Bull Market, there’s always a reason to get bullish: the consumer is spending, housing is strong, the Fed has our back, multiples are expanding, earnings are higher, stock buybacks will push valuations up, and so on, in an essentially endless parade of self-referential reasons to buy, buy, buy and ride the rocketship higher.
The classic Bull Market reason to get extremely bullish is, yes, bearish sentiment: sentiment is terrible, and bearish sentiment is the surefire marker of a stock market bottom. The more bearish the sentiment, the more reasons to get bullish and start buying with abandon: max out the margin account, hock the farm, empty the kids’ college savings, whatever you need to do but dang it, dump every cent you have into stocks when sentiment gets bearish.
Since only those of us with gray hair have actually lived through a real Bear Market, younger participants cannot imagine sentiment is bearish because conditions are bearish. The last real Bear Market was in the 1970s and early 1980s, about years ago. By “real” I mean deep, enduring and pervasive.