We are likely in a cyclical (short-term) bear market within a long-term (secular) bull market in stocks:
Birds Eye View: What we have seen in equities over the last year is in line with historical bear markets within secular bull markets in terms of time and percent loss (Source: Ned Davis Research):
But Didn’t Markets Peak in October? No! Most markets peaked in January of 2018. That is a full year of bear markets for most indices!
A Retest: It would also be in line with history to see markets retest lows before the start a cyclical bull.
History rhymes but does not repeat: We have had one of the longest expansions in history, which gives pause to the call that the next bull market will be as strong as the average.
When to buy? Drawdowns greater than 20%-25% usually include either high valuations/major asset bubbles, an aggressive Fed, and/or an oil shock. None of that exists today. Therefore, if we retest lows set in December we are likely buyers.
Risks: Main risk today is greater than expected deterioration in the economy due to higher than average geopolitical risk and potential policy errors.