No Bear Yet? Average Stock Already Down 30%

Even though it is officially still not in a recession, Warren Buffett made headlines Monday morning when he said that by any common sense measure, the US economy is in a recession. On a similar line of reasoning, even though we have yet to hit the official threshold for a bear market, for all intents and purposes, the average stock is already well into bear market territory.

In the chart to the right we summarize how much the average stock is currently trading below its 52-week high. As shown, no matter what its market cap, stocks are currently trading more than 20% below their 52-week high. Small caps are currently faring the worst with an average decline of more than 35%, while large caps are down a relatively 'modest' 25.1%.

On a sector basis, the results are just as downbeat. We all know the consumer is having trouble, but the stocks of the Consumer Discretionary sector are practically past life support with an average decline of 43.4% from their 52-week highs.

With commodities hitting all-time highs, one would think that Materials stocks would be doing well, but as of today's close, the average stock in that sector is now down 29%.

The sectors that have held up the best are Energy (-14.6%) and Utilities (-11.4%), as these sectors still have yet to reach average decline levels of more than 20%.

click to enlarge

Comments

[Buba:]

Take for example Large Cap & the S & P 500, what you are showing is the difference between a weighted & non weighted index. So what I read from your analysis is that the weighted indexes are going to fall even more as they catch up with the majority of the stocks in the index. So therefore we got a way to go before this Bear is over.

2008 Mar 04 02:26 PM

[User 160112:]

Buba: the difference is less due to weighting than timing. The numbers shown are the drops from the high for each stock. But each stock did not make a high at the same time and thus there is a difference when you look at the drop in the index from its high.

2008 Mar 04 02:49 PM

[Dana Cole:]

The problem as I perceive it as that we need a really good flush out on the down side, which we are not getting because diehard buyers are weakly holding prices up. This is the same as saying that we have not quite reached the level of pessimism that characterizes bear market bottoms. If most of today's buyers were to step aside for two weeks, they'd find themselves buying at levels which would all but guarantee them great profits. The same cannot be said for sellers holding back, however, since everyone still seems to be looking for a "test of the January lows" and not a rally upwards.

2008 Mar 04 03:08 PM

[Rep07:]

Won't see the lows til August-October timeframe (ARMS damage wave working its way through the system).

Bad news will keep getting worse in Apr, Jul, and Oct reports.

11,000 by June, 10,200 by October.

2008 Mar 04 04:31 PM

[300m:]

Thought I might see the toilet flush today but Obama somehow gave even the bulls hope.
I too am sitting on cash hoping for 11600/1270/2200 levels so that my index buy orders are triggered.
Investing like a fox,I will hide for now.

2008 Mar 04 07:01 PM

[Stuart Scha...:]

That the market is doing pretty lousy right now is obvious. The big question is, 'what will be doing well in a year or two?' My thoughts? It's going to be a tough year with headwinds like the housing market, the subprime/mortgage mess and the price of oil. Lets see - the first -the housing market - is an essential U.S. industry. Strike one. Subprime/mortgage industry is second and is also an essential U.S. industry. What's more - the problems are spreading to other areas of the financial industry and depending on who you speak to, more write-downs are coming (to the tune of tens of billions of dollars more...). Strike two. The third strike comes from the oil industry. The price of oil has concomitant affects in industries as varied as manufacturing, gas, the automobile industry and more. When the price of a raw material goes up, the price of products that use the raw material are going to increase as well. Obvious economics, but some folks still forget this. We shouldn't - otherwise this could be a long and volatile stock market this year.

Regards,

Today’s Value Investor
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2008 Mar 05 12:01 AM

[pepe:]

Wow!!! I'm glad we're not really in a recession yet.

2008 Mar 05 10:17 AM

[The Level 2...:]

I personally think the figures shown is not the end of story yet!

The Bear is yet to come...

2008 Mar 06 11:41 AM

[Igor The Great:]

Wow! With so many bears here, I feel like a lttle scared Red Ridin Hood! Would this be one of those Election Years when market did go up?!

2008 Mar 06 09:29 PM