After a brutal week on the stock market, market sentiment remains pessimistic, which was accompanied by a sell-off in the broader market. Concerns about stubborn inflation and an increasingly aggressive US Federal Reserve (Fed) continue to put pressure on the stock market and riskier assets in particular.
Similarly, investors are expecting the Fed to hike rates by 75 basis points during its June 15 meeting amid growing concerns that central banks will not be able to cut consumer prices without the economy going into recession drive recession.
As a result, losses in the broader market have been severe, with the S&P 500 plummeting more than 21% year-on-year (YTD) and wiping out more than $8 trillion in market value this year alone.
Big tech stocks were among the biggest losers, with Amazon (NASDAQ:AMZN), Nvidia (NASDAQ:NVDA), Meta (NASDAQ:FB) and Apple (NASDAQ:AAPL) down 16.8%, 16.3%, 16.3% and 10.7% fell. confronted. % respectively.
S&P 500 1-week performance Source: Finviz
Crypto doesn’t fare any better
Similarly, the cryptocurrency continued to decline, with bitcoin dipping below $21,000, down more than 30% in just one week, suggesting investors have dumped their most speculative holdings.
Bitcoin 1-week performance Source: Coinmarketcap
There also appears to be some correlation between the crypto market and the stock market, as Bitcoin appears to have tracked the performance of the Nasdaq and S&P 500 indices over the past 30 days. Nonetheless, the Fed meeting will likely determine the direction of the trend and a possible break.
Bitcoin Correlation with Nasdaq and S&P 500 Source: Twitter
How are the markets doing?
Throughout history, a bear market has taken an average of 389 calendar days from peak to trough, meaning the market is currently halfway through.
Certain indicators can signal market participants whether more pain is to be expected, such as: B. the Cboe Volatility Index, also known as the VIX. Typically, the VIX is viewed as a “fear gauge” measuring the expected volatility in the market, expressed through option prices.
During the Covid downturn, the VIX hit 85 levels while averaging 37 at market bottoms. During the market sell-off on Monday, June 13th, the VIX was trading at 35.05. On the other hand, the volume of put options hit 2.03 million on Monday, the highest since February 2020, according to data from Cboe.
By comparison, the American Association of Individual Investors’ Sentiment Survey shows that investor sentiment is beginning to decline, meaning broader markets could face more pain as individual investors start to exit.
Finally, the stock market could buy as some stocks are oversold. However, deciding when to enter can be one of the most difficult decisions an investor has to make in a bear market.