Fund Returns Suggest Possible Market Slump: S&P

Large cap funds fell by around 0.4% during the quarter, compared to a decline of almost 3% for domestic equity funds.

Altogether, funds saw an average decline of close to 3% in the third quarter.

“After bidding up smaller, lower quality companies in the early stages of a bull market, investors traditionally turn to larger, more stable and higher quality companies as growth becomes harder to find,” explains Sam Stovall, chief investment strategist at Standard & Poor’s. “There is a possibility that we are in the midst of a secular bear market combined with short-term, cyclical bull markets, although it is too soon to tell.”

S&P says a cyclical bull market starts with a 20% or more bounce off a previous bear market’s closing low, while a secular bull market sets new record highs.

The company defines a bear market as a decline of at least 20% from a recent high. The S&P 500 would need to close at 926 before Standard & Poor’s would label the current weakness as bear country.