MAY 01, 2022 – 09:15 AM …
Just how bad was it?
The Nasdaq’s 13% plunge in April was its biggest monthly drop since Lehman’s collapse in 2008.
Investors Have Given Up on a V-Shaped Recovery, BNY’s Young Cautions
That is the 12th worst month ever. To be the worst month ever you have to beat October 1987 that has a 27% decline. The poster-child of this bear, ARK Innovation, actually managed to (-28% in April).
The S&P 500 slipped -9.60% in April, marking its worst month since the COVID-19 shock in March 2020 (-12%). And as The Market Ear details, tech was not even the worst drag. The most significant sector drivers were: Consumer Discretionary (-2.28% drag), Communication Services (-1.96% drag) and Information Technology (-1.33% drag).
And the S&P is now suffering its worst start to a year since the start of World War 2!!
Is the worst start to a year since 1939 a buying opportunity? The 4 other “top 5 worst starts” all then rallied 13-28% for the remainder of the year.
But it’s even worse under the surface of the headline indices, with 45% of stocks down over 50%, 22% of stocks down over 75%, and 5% of stocks down over 90%…
The only comparisons are Oct 2000 – Oct 2002 and Nov 2008 – Apr 2009.
And it’s not just stocks, this is only the 4th month since 1973 when the S&P was down over 5% and Treasuries down over 2%…
At -11%, this is the largest drawdown in the US bond market since 1980. Back then the 10-year treasury yield was at 12.6%. Today it’s at 2.9%.
And Global Bonds suffered their biggest loss since 1920…
So to answer the question we posed at the start – it’s bad, really bad.
But there’s no ‘capitulation’ yet… “Closer but not yet real capitulation which tends to come with readings of -2.5 or worse. just not enough stocks that are 20-40% off of highs as “good” groups not yet corrected…staples, utes, energy, materials come to mind”
Legendary investor Bill Gurley tweeted some pearls of wisdom:
An entire generation of entrepreneurs & tech investors built their entire perspectives on valuation during the second half of a 13-year amazing bull market run.
The “unlearning” process could be painful, surprising, & unsettling to many. I anticipate denial.
- Previous “all-time” highs are completely irrelevant. It’s not “cheap” because it is down 70%. Forget those prices happened.
- Valuation multiples are always a hack proxy. Dangerous to use. If you insist, 10X should be considered AMAZING and an upper limit. Over that silly.
- You may be shocked to learn that people want to value your company on FCF and earnings. Facebook trades at 14X GAAP EPS, & is growing 23%. What earnings multiple are you assuming?
- Revenue & earnings QUALITY matter.
And, with AMZN facing its biggest drawdown since 2009…