By Caroline Valetkevitch
NEW YORK (Reuters) – The Nasdaq Composite Index () confirmed on Friday it’s in a bear market for the first time since 2008, underscoring fears that the longest bull run in historical past for U.S. shares may quickly be over.
The index completed the day down 21.9 p.c from its Aug. 29 report closing excessive, exceeding the 20 p.c decline thought of the threshold for a bear market.
The Nasdaq is the first of the three major U.S. stock indexes to cross that threshold, with its drop in lower than 4 months the newest signal that the bull market that started throughout the monetary disaster a decade in the past may very well be virtually performed.
Several different key indexes in current days have confirmed they have been in bear markets, amongst that are the Russell 2000 small-cap index () and the Dow Jones transportation common ().
The S&P 500 (), the benchmark for U.S. shares, just isn’t but in a bear market, although greater than 60 p.c of its parts are.
The S&P 500 is down 17.5 p.c from its Sept. 20 report excessive shut, whereas the Dow Jones Industrial Average () is down 16.3 p.c from its Oct. 3 report.
The Nasdaq’s fall displays a pointy transfer by buyers away from what had been the market’s leaders – the so-called FAANG group of 5 favourite know-how and web shares.
“It’s the old saying, the generals finally got hit,” stated Quincy Krosby, chief market strategist at Prudential Financial (NYSE:) in Newark, New Jersey.
GRAPHIC: The bear approaches – https://tmsnrt.rs/2Smr3Fy
The newest spherical of promoting, which on Friday dragged the Nasdaq down almost 3 p.c to its lowest closing degree since August 2017, comes two days after the Federal Reserve raised rates of interest for a fourth time this 12 months, as the U.S. central financial institution continues to unwind the low interest-rate coverage that supported shares for almost a decade.
Concerns of slowing financial development have additionally led buyers to flee shares high-valuation sectors equivalent to know-how and communication companies.
In Nasdaq’s record-long bull market, which ended with its all-time-high shut on Aug. 29, the index gained greater than 539 p.c from its post-financial-crisis low on March 9, 2009. Including reinvested dividends, it delivered a complete return of greater than 611 p.c in that point.
By distinction, in that very same interval, the S&P 500 () gained simply 331 p.c, with a complete return of 425 p.c. Even with the drop since late August, Nasdaq is sort of 400 p.c above its March 2009 low, with a complete return of greater than 456 p.c.
“Nasdaq is your more growth-oriented story, so the biggest stocks are driving the overall market because they’re a bigger chunk of it,” stated Kim Forrest, senior portfolio supervisor at Fort Pitt Capital Group in Pittsburgh.
Past Nasdaq bear markets have lasted a very long time and minimize deeply. For occasion, the Nasdaq fell 55.6 p.c throughout its final bear market, which ran from Oct. 31, 2007, to March 9, 2009.
Some buyers will not be satisfied the present bull market is over for the S&P 500. Many strategists nonetheless are forecasting the S&P 500 will finish subsequent 12 months with modest beneficial properties.
“The market is caught up in this hysteria,” stated Ken Polcari, managing principal at ButcherJoseph Asset Management in New York. But “it’s an overreaction,” he stated, “and if you’re a long-term investor, the last thing you should be doing right now is selling.”