Worst April in 50 years

But there is plenty of room for it to get worse

Well, that was fun.

• The S&P 500 experienced its worst April since 1970 with an 8.8% decline.

• The Dow Jones Industrial Average suffered a 4.9% decline for the month, also its worst April since 1970.

• The Nasdaq Composite closed out its worst April since the dot-com bubble burst in 2000 and its worst month since October 2008.

As if that didn’t hurt enough.

The S&P 500 has just had its worst four-month opening to the year since 1939, falling 13.3% and is down 13.9% from its high.

As of the end of April:

• Nasdaq Composite -21.2% YTD and -23.2% from its high

• Bitcoin -18.1% and -42.8% from its high

• Russell 2000 - 17.0% YTD and -23.7% from its high

• Dow Jones Industrial Average -9.3% YTD and -10.4% from its high

• NYSE Composite -9.0% and 10.0% from its high

The Nasdaq, Russell 2000, and Bitcoin are all in bear markets and the S&P 500, Dow, and NYSE Composite are in correction.

I will go out on a limb here and guess that there may have been more than the usual number of empty bottles of scotch come Saturday morning in recycling bins. While all lovers of that particular spirit know that Johnny Walker Blue is truly a thing of beauty (and I’ve likely enjoyed more than my share over the years), I’d like to suggest another.

For those who may be in search of a new type of market madness painkiller, I highly recommend Tyrconnell. In all fairness, being full-blooded Irish, I am a wee bit biased, but ya feckin’ kidding yerself if ya think ya be knowin’ whiskey and ya haven’t tried ‘er. (I may or may not have had a glass while writing up this peace which tends to bring out me Irish).

I am ashamed I have to use a stock image. I wrote this in San Diego and much to my horror I discovered I’ve run out of all my Irish whiskey here. I’m fearful my Irish passport may get revoked.

Back to business.

You might think that after such profound declines, investor sentiment couldn’t possibly get worse. But, there is room for more pain, which means, at least according to sentiment, we aren’t out of the woods yet.

The CNN Fear & Greed Index has fallen to Fear and is approaching Extreme Fear but is still more than double its low of 12 from last year.

The following chart shows the AAII bullish sentiment reading for the past three decades. The pale gray line is the S&P 500 over that time, axis on the right. The dark red horizontal line is the current level of bullish sentiment. Only once before has bullish sentiment been this low, but as you can see from the chart of the S&P 500, a bottom in bullish sentiment doesn’t consistently predict a market bottom.

This next chart is the AAII bearish reading for the past three decades, with the red horizontal line the current bearish level and the grey line again denoting the S&P 500. Bearishness has only been this high a few times in history, all during the Great Financial Crisis.

Bearish sentiment hit 59% in late January 2008 (today, it’s 59.4%), yet the S&P 500 fell another 50% between then and the market bottom in March 2009. Bearish sentiment peaked at 70.2% on March 5, 2009, which was the bottom of the market.

The bottom line is that while the markets have been brutally painful, there are still plenty of indications, investor sentiment being one, that more pain is possible.