The S & P 500 just missed the dreaded milestone of falling into a bear market, and that could mean strong gains for the benchmark index going forward. At one point last week, the S & P 500 was down more than 19% from a record closing high set in early January. However, a bounce on Friday helped the index dodge a bear market — which is typically defined as a 20% drop from a recent high on a close-to-close basis. That marks the sixth time since 1978 that the S & P 500 has tumbled more than 19% but did not enter a bear market, according to Credit Suisse. Over the following 12 months, monster gains have followed up on five previous instances. For example, after March 1978’s trough, the index soared by 13% within the year. The S & P also posted gains of more than 37% after reaching its October 1998 and December 2018 lows. After a bottom in October 1990, the S&P rallied 29% and 32% respectively. The gains in the next three- and six months were also strong. Credit Suisse noted that this market might not be able to rely on the Federal Reserve for support, like it did during many previous near misses. According to the bank, “On three occasions there was an evident catalyst (with benefit of hindsight), that explained the low. The Fed then eased or suggested that it would ease on each one of these bear markets. Credit Suisse says the Fed raised rates in order to curb the most severe inflationary pressures for decades. Credit Suisse doesn’t believe the Fed will reverse its current course. “At the moment, we are struggling to find an immediate catalyst that will stop further falls. The Fed might hint or ease into such an action, but it seems unlikely.
