By Barbara Kollmeyer
Add our call of the day to that last batch. It comes from True Contrarian blog and newsletter’s chief executive, Steven Jon Kaplan, who sees investors mired in what could be the longest bear market in history, and “approaching the next and probably the biggest percentage drop of this bear market so far.”
MarketWatch last spoke to Kaplan in mid-November 2021 , when he warned of a looming selloff for stocks, notably big highfliers. Just days later, the Invesco QQQ /zigman2/quotes/208575548/composite QQQ -1.70% exchange-traded fund (ETF) that tracks the Nasdaq-100 Index, and many other tech funds topped out. The S&P 500 /zigman2/quotes/210599714/realtime SPX -1.51% peak followed on Jan. 4.
Kaplan based that November caution partly on one of his favorite indicators — company insider selling and buying, which he tracks via J3 Information Services Group.
In an interview with MarketWatch on Wednesday, he rattled off a list of worrying signals, such as aggressive selling by that group again, individual investors piling into the market, declarations that the bear market is over and the Cboe Volatility Index, or VIX /zigman2/quotes/210598281/delayed VIX -0.69% , skirting under 20 in recent days.
History also plays a big part in his worries about markets right now.
“It is fascinating to see how closely the 1929-1932 and 2000-2002 bear markets paralleled each other, with almost exactly the same kinds of pullbacks and rebounds. I expect similar behavior for 2022-2025,” he said. (See link to original chart )
Kaplan noted that it took eight years for the 1929 bear market to arrive, nearly 10 years for March 2000s and even longer for the bear market he sees as ongoing, given the bull market began in March 2009.
“So what they all have in common is that these very long bull markets preceded the bear markets for so long, that people tended to forget how to invest in bear markets and what they’re about,” he said.
The familiar bear market pattern through history has been a small drop to start that doesn’t spread panic, then a soothing bounce, then a bigger drop and a bigger rebound, which again relaxes investors. But he said based on 1929, 1973 or 2000, the next stage of selling could bring dramatic losses, such as 40% for a fund like QQQ.
Kaplan is worried about the latest Fidelity quarterly retirement survey , which revealed investors clinging to hopes that the market will return to highs if they wait long enough. Challenging that, Kaplan pointed to another study showing that individuals who invested in the market in September 1929 were still 38% down by August 1982 in real terms, adjusted for inflation.
“It kind of explodes the myth that you have to come out ahead if you just kind of hang in there when things are tough,” he said.
So how to cope with another big drop. Repeating November advice, he recommends I-Bond or Series I savings bonds that can be bought directly from the government and are currently offering a return of just over 9%. U.S. Treasurys are also paying 3% to 3.5% right now, another way to go for the coming years, he said.
Stocks /zigman2/quotes/210598065/realtime DJIA -1.71% /zigman2/quotes/210599714/realtime SPX -1.51% /zigman2/quotes/210598365/realtime COMP -1.51% are drifting south , following Wednesday’s Fed-inspired losses, as bond yields /zigman2/quotes/211347051/realtime BX:TMUBMUSD10Y 0.00% /zigman2/quotes/211347045/realtime BX:TMUBMUSD02Y 0.00% drop, while the dollar /zigman2/quotes/210598269/delayed DXY -0.07% moves higher. Oil prices /zigman2/quotes/211629951/delayed CL.1 +0.31% are also climbing, and bitcoin /zigman2/quotes/31322028/realtime BTCUSD +0.35% is hovering under $24,000.