For a bull market that has kept the bear at bay for more than a decade, this stock market is racking up some scary downturns. The one that began after Standard & Poor’s 500-stock index hit a high in late July saw stocks fall close to 6% by mid-August, with occasional bounces depending on the news of the day, presidential tweets or interest rate moves.
The summer swoon still qualifies as just a “pullback,” defined as a drop of between 5% and 9.9% from the market’s most recent high. But that makes the second pullback so far in 2019, following two full-blown corrections—declines of 10% to 19.9% from the high—in 2018. Once you get past 20%, you’re in bear country.
Does the market’s malaise mark the end of the bull’s run? For now, it looks like the bull will live to fight another day, but you can probably expect more pain and certainly more volatility.
The safe havens investors seek during times of turmoil, such as gold and U.S. Treasuries, have risen in price as stocks have convulsed (see “Go for the Gold?” on page 33). A sentiment survey from the American Association of Individual Investors found that pessimism spiked in early August to the highest level since December 2018.
The culprit that keeps knocking the wind out of the market is the trade war between the U.S. and China, which, on any given day, appears either intractable or closer to a resolution. Although a portion of the lat