The stock market bull has been running more or less since early-2009, with nearly 200pc in gains on world stocks at the start of 2018. As this year progressed, that run has been undermined by a cocktail of rising interest rates, trade tensions, and currency crises in emerging markets.
In fact, the bull has turned into a bear in many places: a growing number of equity indexes across the globe have slipped into ‘bear’ territory – commonly defined as a price drop of 20pc or more from their highest levels of the previous 52 weeks.
The share of bear stocks by index is catching up all over the world too – from West to East, from developed to emerging markets. On the surface, if measured from 52-week highs, the performance of global stocks does not appear troubling.
The benchmarks of the United States (S&P 500) and Europe (STOXX 600), for example, are not yet in ‘bear’ market territory. But a closer look reveals the share of constituents in bear markets in both these indexes has been steadily rising over the course of this year.
In Ireland the Iseq index is 15pc below its level at the start of this year, and 11pc lower than where shares were a year ago.
As for China, worries about trade and a slowing economy have battered the country’s stocks, pulling a staggering 90pc of those in bear markets as of November while its main benchmark (CSI 300) has been down over 20pc since mid-2018.
Looking at the bull-bear divide gives an insight into the mood among investors about the future of the market. As of this month slightly more investors are upbeat than downbeat about the performance of the stock market in the next six months.
At the start of this month Reuters columnist Jamie McGeever highlighted the trends and implications that could feed back into the real economy and change the situation, for example through lower business sentiment or reduced corporate spending and investment.
In the background to all of this is the US Fed’s interest rate increases, which are normalising what was a super abundance of financial liquidity. The ECB is behind on the same path, and there will be implications as QE ends here.
At the same time US President Donald Trump is pumping up spending, funded by a deficit.
In China growth has slowed, and trade tensions with the US will have a price.
Europe, meanwhile, has clawed its way back to growth following the financial crisis only to emerge into a rolling crisis of political authority, that includes Brexit in the UK and the battle between Brussels and the Italian government over spending plans.