Longtime bull turned bear says S&P 500 could tumble 34.1%

Jim Stack, president of Stack Financial Management and InvesTech Research, has been bullish since early 2009.

Last Friday, in his long-running InvesTech newsletter, he wrote: “Judging by the depth, duration, and broadening sector contribution to the ‘distribution’ in leadership, we must conclude that Wall Street is currently in a bear market.” “Distribution” is Wall Street-speak for “selling.”

And it may be just the beginning, so stocks could fall more and the pain could last longer than many are ready for. The bear’s depth and duration will depend on whether the U.S. economy slips into recession.

Daily volatility has spiked. “This is a war between the bulls and the bears ... and so far the bulls are losing.”

In fact, in the past 85 years, the only bear market that didn’t give back half the bull market’s gain was in the 1950s.

Stack calculated that would mean a total decline of 34.1% from the S&P 500’s all-time high of about 2,130 last May, bringing the benchmark index back down to around 1,400. Without a recession, he estimated, the bear would be “relatively contained” — a decline of around 25% or so.

Read more:

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• Recession, market crash next year, expect rate cuts: Rickards
• 10 Stocks Warren Buffett Loves for 2016 — Including Apple