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Equity recovery still seen with "contempt" as many still use 2000-2003 and 2008 lens = rally in face of skepticism

Over the past week or so, a few charts have been making their way across trading desks. These are charts comparing 2022 to the 2000-2003 bear market and the GFC's 2008 bear market. A few trading-oriented clients noted this and I found these two instances on twitter and reddit.

  • the message from these charts is two fold
  • first, equities rally even in the midst of a broader downturn --> bear rallies
  • second, equities today have far more downside
  • is it any surprise many investors expect the S&P 500 to fall towards 3,000 or so

Skeptics compare 2022 to 2000-2003 Bear Market


Skeptics compare 2022 to 2008 GFC Bear Market

Source: Reddit

In short, the recovery in stocks since mid-June has been mostly met with contempt. Contempt and skepticism because investors see multiple fundamental problems and as a consequence, equities should not be rallying:

  • a recession is only getting started
  • EPS downgrades are only getting started
  • interest rates are still gonna "rocket higher"
  • P/E needs to fall to 15X or lower
  • retail investors need to be liquidated
Bascially, skeptics want to see scorched earth and no survivors. This is not our view, of course. While there remains poor visibility and considerable risks, our base case is a "growth scare" and as such, the F...

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