‘Stealth’ bear market stalks Wall Street

The broad U.S. stock market is down about 10% from its January high. And that puts it a far ways off from a bear market, or a drop of 20% or more.

But dig deeper and it’s clear the Wall Street bear already has ravaged many stocks.

Nearly one of four (22.4%) companies in the S&P 500 stock index were trading at least 20% below their 52week highs heading into the last trading day of March, according to FactSet. And that adds up to what Wall Street dubs a “stealth” bear market.

Often, broad indexes such as the market-value-weighted S&P 500 mask the pain beneath the surface. Big, winning stocks often hide the blemishes of the losers, such as General Electric, which is 55% below its April 2017 high. Stocks now in bear market territory include many well-known names: Mattel, FootLocker, Chipotle, Harley-Davidson, UnderArmour, General Motors and UPS.

“This certainly feels like a bear market for most investors even if it doesn’t meet the technical requirements 100%,” says Chris Rupkey, chief financial economist at MUFG in New York. “Anyway you slice and dice the returns, investors are profoundly disappointed in the stock market performance this year.”

But not everyone is calling the recent carnage a stealth bear. The market is simply undergoing a shift in which money is being moved out of tech, materials, financials and other parts of the market, says Erik Davidson, chief investment officer at Wells Fargo Private Bank. Investors, he says, have turned defensive and are redeploying cash in real estate, utilities and energy stocks.