Jamie Dimon: don’t be surprised if the S&P 500 loses another one-fifth of its value

 (Bloomberg) -- Jamie Dimon says don’t be surprised if the S&P 500 loses another one-fifth of its value. While such a plunge would fray trader nerves and stress retirement accounts, history shows it wouldn’t require any major departures from past precedents to occur.

Judged by valuation and its impact on long-term returns, the JPMorgan Chase chief executive officer’s “easy 20%” tumble, mentioned in a CNBC interview yesterday, would result in a bear market that is in many regards normal. A decline roughly to 2,900 on the S&P 500 would leave the gauge 39% below its January high, a notable collapse but one that pales next to both the dot-com crash and global financial crisis.

The price implied in Dimon’s scenario is roughly the index’s peak from 2018, the year when President Donald Trump’s corporate tax cuts took effect and an equity selloff forced the Federal Reserve to end rate hikes. Rolling back the gains since then would leave investors with nothing over four years, a relatively long fallow period. But, given the force of the bull market that raged before then, it would cut annualized gains over the past decade only to about 7%, in line with the long-term average.

Momentum stocks signaling an extended bear market

U.S. stocks with the most price momentum are signaling an extended bear market, according to Jonathan Krinsky, chief market technician at Bay Crest Partners LLC. Krinsky cited the ratio between the Goldman Sachs High Beta Momentum and S&P 500 indexes in a report Wednesday. Goldman’s gauge is based on owning stocks that are rising the fastest and betting against stocks falling the most. The index doubled relative to the S&P 500 this year through March 23, when the ratio set a record. The strength shows investors “sold what they wanted to,” Krinsky wrote -- not what they had to, as they do when bear markets end.

Rates send U.S. housing, auto stocks into bear market

Shares of U.S. homebuilders and automakers are “over their skis” as a result of higher interest rates, according to Josh Brown, Ritholtz Wealth Management LLC’s chief executive officer. Brown cited the industries in a post Monday on his blog, the Reformed Broker. Bear markets in both groups began after the S&P Composite 1500 Index, combining the S&P 500, MidCap 400 and SmallCap 600 indexes, peaked Jan. 26. The composite’s housing index fell 37 percent from that date through Monday and its auto gauge lost 29 percent.

Dow Transports trying to reclaim broken post-2009 UP trendline

Here’s what the Dow Transports is up against to keep its bull market alive

Market testing August 2015 lows (1/20/15)

• The Standard & Poor’s 500 Index knifed through its lows from the August crash at 1,867 earlier today, before staging a partial recovery this afternoon. The Dow Jones Industrial Average and Nasdaq Composite Index also sold off sharply, but didn’t quite get through their intraday August lows at 15,370 and 4,292, respectively.
• On the other hand, the Dow Transports and Russell 2000 Index bid adieu to those support levels a couple weeks ago. The Russell just hit the lowest since July 2013, while the Transports tanked to the lowest since October 2013. As a matter of fact, the iShares Transportation Average ETF (IYT) is down more than 11% year-to-date.

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past bear markets (Carter Worth)