Global equities were down more than 10% for the year. The damage trackers we watch still suggest that the correction, the bear market (or whatever you want to call it), is still in its early innings. Previous points of strength are now turning into points of weakness. It is also a midterm election year which is often difficult for bulls in the third quarter.

Another tough week

Last week, US stocks fell almost 3% while foreign stocks actually managed to outperform a bit. Value slots were also “less bad”. Bonds, however, suffered significant losses as interest rates rose and credit fears mounted. Investment-grade fixed income fell about 3%, while junk bonds fell 2%. The sales scope is vast in 2022.

From a fork to a downturn

For non-US equities, last year’s break in the uptrend has turned into a decided reversal. Our chart below illustrates how the broad international stock market found resistance at the top of 2007. It also failed to find support at the zenith of January 2018. Investors wonder where things will bottom out. Meanwhile, the 200-dma moving average extent indicators prove that downside participation is strong. The bears are clearly in control. The percentage of countries in long-term stock market downtrends is over 70%.

Featured Chart: International Equities Pause and Renew to 2007 Highs with Strong Downside Momentum

Shades of March 2020? Yes and no.

Our flagship Weekly Macro Themes report dives into the similarities between the current market and March 2020. There are also key differences. Still, the bears could be about to roar – the proportion positive over the past 12 months is about to cross a significant threshold that has always been the hallmark of definitive bear markets.

Market pulse

What is another damage counter? New 52 week lows. International equities fell rapidly, but the number of new lows is somewhat subdued at the moment. Only 20% of the 70 countries we monitor have reached a new low. Many stock markets peaked in March or June of last year, so it may only be a matter of time before this gauge improves. The bearish push in equities still seems early according to this indicator.

Bear Market Technical Account

Additionally, a surprisingly small number of countries are in technical bear market territory (down 20%). We assert that more bearish participation will take place in the coming months to solidify 2021 and 2022 as another global bear market – perhaps like what we saw in 2015-2016 or 2000-2002.

All bear markets are different, however. The contrasts between the current context and that of March 2020 are numerous. Growth was a relative safe haven during the Covid Crash, but it is now a source of weakness. Monetary policy also cushioned the blow but is now a major headwind.

Conclusion: We remain bearish on global equities. However, we see some opportunities. This week’s report identifies good risk/reward areas in EMFX and among LatAm stocks. Overall though, weak technical data, political and inflation headwinds, and a lack of value argument continue to point to volatile times ahead for global investors.