STORY: After suffering massive losses for weeks, the S&P 500 on Friday briefly dipped into bear market territory for the first time in 2 years in a neck-breaking whipsaw session before stocks bounced back to close near breakeven.
Worries over surging inflation and fears the Federal Reserve - in an effort to contain it - could tip the U.S. economy into a recession have pummeled stocks this year, with disappointing outlooks this week from the country's biggest retailers Walmart and Target adding to concerns about the long-term health of the U.S. consumer.
The Dow and S&P ended about flat but in the green, while the Nasdaq finished down just three tenths of a percent.
Still, the Dow saw its eighth-straight week of declines, its longest losing streak since The Great Depression.
The S&P 500 finished about 18% lower from its Jan. 3 record high. But, during the session, it briefly passed the 20% threshold thought to signal a bear market.
Michael Jones, chairman & CEO of Caravel Concepts says despite Friday’s rebound, he sees more pain ahead.
I suspect that we will see the bottom in the stock market probably, you know, in the in the traditional summer months, particularly maybe August. [FLASH] Because, remember, part of this pullback is not just that we're going to have a recession and the Fed is raising interest rates, but also that the market was pretty pricey. It was pretty overvalued as we moved into 2022. So we see a lot of the overvaluation and a lot of the technical support coming in as the market drops a total of maybe 30, 35%. So that would suggest we're about two thirds of the way through this bear market. But there's still a bit more suffering to come."
While not all bear markets have coincided with recessions, data from CFRA Research shows that every recession since 1968 has prompted a bear market.
Jones believes a recession is inevitable.
"We think we will probably be entering the recession sometime by late summer or early fall. [FLASH] The Fed has to raise interest rates until demand comes down enough that pricing pressures are relieved with that without a whole lot of help from the supply side. That means you've got to have a recession. But the recession doesn't have to be very long."
Entering a bear market would mark the end of a rally that sent stocks to record levels during the global health crisis on the back of unprecedented stimulus from a Federal Reserve which is now reversing its policy and unlikely to come to the market’s rescue.