If the S&P 500's Pullback Turns Into a Full-Fledged Bear Market, It Would Be Statistically Unique, According to 76 Years of Data
Why it matters: A full S&P 500 bear market would be statistically unique, diverging from 76 years of historical data.
- S&P 500 (^GSPC) is currently a "stone's throw away" from correction territory, while the Dow (^DJI) and Nasdaq Composite (^IXIC) have briefly dipped into it since the Iran war began on February 28.
- Federal Reserve is identified as the likely catalyst for a bear market if it reverses its rate-easing cycle due to inflation concerns, potentially halting cuts or introducing hikes.
- Inflation Nowcasting tool from the Federal Reserve Bank of Cleveland estimates the trailing 12-month inflation rate will climb 85 basis points, from 2.40% in February to 3.25% in March, driven by rising crude oil prices due to Iran's closure of the Strait of Hormuz.
- Carson Investment Research data, shared by Chief Market Strategist Ryan Detrick, shows that the 11 S&P 500 bear markets since 1950 saw their initial 5% declines occur over an average of just 14.5 trading days, suggesting the current, milder pullback is statistically less likely to escalate into a bear market.
Despite recent market pullbacks, including the S&P 500's near-correction, historical data suggests a full-fledged bear market (a 20%+ decline) would be statistically unique given the current pace of decline. While the Iran war and rising inflation could prompt the Federal Reserve to halt rate cuts or even hike rates, a move that could trigger a bear market, Carson Investment Research data indicates bear markets typically begin with much swifter initial drops than the current one.
