Before I share which one Lee thinks we're in, let me tell you how he got his answer. He took the last 34 bear markets over the past 100 years and analyzed how long it took for each market to recover. Here's what he found:
- If we're in a bear recession, 31 bears kept falling for another year after the initial 20% drop before recovering;
- If we're in a cub recession, stocks hit their lows within 19 days then recovering (which was realized on August 6th) - 40% of the total bear markets were cubs, BTW;
- Recession is key factor in determining cub or bear status - as of this date we're currently NOT in a recession;
- Valuations of stocks don't matter - P/E (price-to-earnings), Dividend Yield do not matter;
- In the 12 cub markets, all them were up after 6 months of the market hitting its lows and averaged a 15% return. In those same cub markets after 12 months, all of them were up 25%.
Interesting facts, eh? SO, according to Thomas Lee, we're not in a recession (although we're in a serious-ass slowdown!), and therefore in a 'cub' market. Another fact to consider: we might have hit the bottom of this market, as the Dow Jones has apparently stabilized around 11,880. That low has been tested three times since that low was achieved.
What do all these numbers mean? Is it time to buy into the stock market? Or are we going to test that 11,800 for another year? Keep your eyes glued to this market and see if Mr. Lee's study is landmark or wanderlust in nature! After watching this market rise by 303 points today (8/08), and being up higher for the week, perhaps we're getting out of this!
BTW, I took a lot of the information for this posting from the following link - let me know what you think:
After watching this market rise today by 303 points
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