New Energy Weekly – There are cycles to everything
A year ago, I walked through a ghost town in New Orleans.
In August that year, Hurricane Ida struck Louisiana as a Category 4 hurricane. It devastated the city’s power grid, knocking out electricity to the entire city. It flooded streets and tore off roofs.
When I arrived in October, the city was still in recovery. Combined with the Covid-19 pandemic, it was a shell of the vibrant city I knew. Restaurants were empty. Stores were closed. And only a handful of visitors walked the streets.
It was a city in a deep depression. The mood was oppressive. It felt like the end of an era. But what a difference a year makes.
I’m back in NoLa again, attending the same investing conference as last year. Last night I enjoyed a private jazz concert at the historic Preservation Hall in the French Quarter. The streets are hopping. Tourists were out in force and so were the locals.
This morning I woke up to a beautiful sunny day. I walked through the city to Daisy Dukes for breakfast. The city is unrecognizable from just twelve months ago. Everything is vibrant. The mood is light and boozy.
It feels like the New Orleans from years ago…and that’s a good thing. I see an obvious parallel between what New Orleans went through over the past year and my outlook for the stock market.
There are cycles to everything – businesses, cities, and markets.
New Orleans a year ago, felt like it was on its way into decline. But in just 12 months, the city recovered. That’s what I expect to see from the market as well.
According to the Hartford Funds, bear markets last about 10 months. And they usually take stocks down 36%. We are currently in the 10th month of declines, but the S&P500 is only down about 24%. We’ll have to wait and see if this is a longer than average bear market. But we are right at the average length now, so we should be approaching the end.
If history is any indication, we could see stocks fall further to hit that 36% average decline. But we are closer to the end than the beginning. And once we find a bottom, it will be time to make money.
Have a great week,
Matt Badiali
