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Members of D.A. Davidson & Co.

Bull Markets Die from Excessive Optimism – They Don’t Worry Themselves to Death

"While the recent decline is of bear market magnitude, I think it is more akin to the three biggest corrections we’ve lived through since the market bottomed in 2009. In this case, yearend tax loss harvesting and algorithmic trading seems to have exaggerated what would have been a more routine market drawdown. As in the biggest prior corrections of the last decade, I suspect losses will be recouped in a few months, not over several years.


- 2010 – 16% decline in S&P 500 – losses were recouped in 87 trading days

- 2011 – 19% decline in S&P 500 – losses were recouped in 99 trading days

- 2015 – 14% decline in S&P 500 – losses were recouped in 103 trading days


In my experience, debilitating bear markets occur when the Federal Reserve is trying to cool an overheated economy. That is NOT the case today. The economy isn’t overheated and the Fed isn’t trying to put out a fire. As the economy moved onto a sustainable path, the Fed set out to normalize monetary policy after a years-long experiment with free/easy money." (Poplar Forest Quarterly Letter dated 12/31/2018 by J. Dale Harvey, CEO & CIO, of Poplar Forest Capital)


Full note can be found here: