Fidelity Select Fundranker

Fundranker Blog—Bull vs. Bear

Bull vs. Bear

Through June 29, the S&P 500 Index (as measured by Fidelity’s Spartan 500 Index - Investor Class Fund), the Nasdaq Composite Index (as measured by Fidelity’s Nasdaq Composite Index Fund), and Fundranker’s Top Eight Model Portfolio fell 14.1%, 15.5%, and 17.7%, respectively, from bull market highs they reached on April 23. That put them way into correction territory, generally defined as a 10% decline from bull market highs, and much closer to bear market territory, generally defined as a 20% decline from bull market highs, than any of us would like.

Paul Krugman, Nobel Prize winning economist and NY Times columnist, wrote recently that he fears we are heading into a third depression, which he says primarily will be a failure of policy. Governments around the world seem overly concerned with inflation, when he says the real problem is deflation, and they are preaching the need for austerity when the real problem is inadequate spending to make sure we emerge completely from the Great Recession.

So what does our current situation mean for our economy and markets? Will the bull market that started in March, 2009, with the beginning of recovery from the Great Recession be able to overcome this correction, or will it turn into a bear market? Will private business be able to take over the spending necessary to keep the world economy expanding when governments begin curtailing their stimulus spending?

We’re convinced here at Fidelity Select Fundranker that our system of regularly moving into better performing Fidelity Select funds will stand us in good stead however the market reacts to future events. It’s unlikely that we’ll see markets react again like they did when world financial systems nearly collapsed in 2007 and 2008; there almost always will be at least a few sectors that perform well, and Fundranker will find them.

Posted 6/30/10 11:54am ET in Economy, Fundranker, Market