Everyone’s always looking for bear market canaries, crash harbingers and bad omens more generally.
I see portents of doom all over the place, and not just in the market context. By all rights, I should be the most popular macro-market commentator on the planet. Fear sells, after all.
The problem for me is that the Weltschmerz’s genuine. There’s nothing feigned about my dour mood and despondency. I call it a “shtick,” but it really isn’t. The same way my autobiographical “fiction” isn’t fictional.
As I sneered last week, while commenting on the trailer for some new crime drama starring Halle Berry, people love criminals in movies, but not so much in real life. It’s the same thing with cynics.
I know three of the most widely-read market “permabears” and all three of them are agreeable guys — jovial even. I find that distasteful. If you’re not insufferable in real life, why pretend to be on the internet? That seems like false advertising.
Anyway, bear market canaries. Here are a couple, maybe:
The charts are from SocGen’s Andrew Lapthorne, and on some interpretations they’re a bit concerning. The figure on the left shows that more than one in three names in the S&P is in a bear market, even as the index is just 3% from its October record high.
The figure on the right shows the spread between the average rolling 12-month performance and the median is pretty elevated, another potential red flag. Or maybe “yellow light” is more apt.
Lapthorne put it as a question: “Is a bear market creeping up on unsuspecting US equity investors?”
His permabear colleague Albert Edwards would surely answer “yes, absolutely.” Then he’d invite you for a beer.
IMO Al Edwards’ equity market calls since 2009 qualify him as a permabear. I hear he’s been a much better bond strategist. In my former life as a consultant to a mega billion sovereign wealth fund I was impressed by SocGen’s derivatives desk but never by their equity strategy. Pessimism is perhaps a permanent feature of the French culture, and as a Paris denizen I encountered the phrase “c’est pas possible” from every French artisan I ever asked to fix a leak.
Do you remember when Albert Edaards and James Montier used to publish interesting pieces on “behavioral finance”? About 20-25 years ago. I still have copies, they were good stuff. I don’t recall Albert Edwards being such a bear then.