The Kobeissi Letter believes U.S. equities are in a "stealth bear market"

AT A GLANCE

The Kobeissi Letter stated that most U.S. equity constituents have seen deep drawdowns, and easing macroeconomic pressures could broaden gains.

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View: U.S. equities are experiencing a "stealth bear market," and easing macroeconomic pressures could create a historic opportunity

According to BlockBeats,October 18, The Kobeissi Letter wrote that U.S. equities are showing a "stealth bear market within a bull market": the S&P 500 Index remains only about 2%away from its all-time high, but most constituent stocks have already seen significant drawdowns. The institution believes macroeconomic pressures have depressed equity valuations, while the large technology companies supporting the index's rise still have an earnings-growth foundation. 84%of S&P 500 constituents have declined by at least 10%，59%have declined by at least 20%，41%have declined by more than 30%，17%have declined by more than 50%, while the index's gains are highly concentrated in a small number of companies.

The institution noted that market interest-rate expectations have shifted significantly. At the beginning of the year, investors expected the Federal Reserve to 2026 cut rates at least times in total by 75 basis points; the Federal Reserve has now raised rates once, and the market still expects 2027 June to raise rates more times. With oil prices above 100 USD and inflation approaching 4%, the S&P 500 remains near its all-time high.

One basis for its bullish view is earnings growth. The S&P 500 reported aggregate earnings growth of 2026 in the second quarter of 52%, the highest since the second quarter of 2021. Over the past 12 months, Nvidia's share price rose 21%, while its price-to-earnings ratio declined 46%; its current forward price-to-earnings ratio is about 24 times, close to the S&P 500's 22 times. The institution believes that the large technology stocks driving the index higher still reflect a substantial macroeconomic discount, and that current market concentration is favorable to the S&P 500, or at least has not yet become a problem.

Regarding the outlook, the institution believes that if signs emerge of an end to the Iran war and the global energy crisis eases, energy prices and inflation expectations could decline accordingly. The Federal Reserve could also shift to a more dovish stance, thereby reducing the valuation discount on technology stocks and broadening gains to more stocks. It also proposed that, had the Iran war never occurred, the S&P 500 might already be above 9000 points.

Original link https://m.theblockbeats.info/flash/372404

Key points

BlockBeats October 18 According to the report, The Kobeissi Letter describes the current U.S. equity market as a "stealth bear market within a bull market."
The article states that the S&P 500 Index is about 2%away from its all-time high, but 84%of its constituents have declined by at least 10%，59%have declined by at least 20%，41%have declined by more than 30%，17%have declined by more than 50%。
The institution stated that at the beginning of the year, investors expected the Federal Reserve to 2026 cut rates at least times in total by 75 basis points; the Federal Reserve has now raised rates once, and the market still expects 2027 June to raise rates more times.
The article states that with oil prices above 100 USD and inflation approaching 4%, the S&P 500 remains near its all-time high.
The article states that the S&P 500 recorded aggregate earnings growth of 2026 in the second quarter of 52%, the highest since the second quarter of 2021.
The article states that over the past 12 months, Nvidia's share price rose 21%, while its price-to-earnings ratio declined 46%; its current forward price-to-earnings ratio is about 24 times, close to the S&P 500's 22 times.
The institution believes that if signs emerge of an end to the Iran war and the global energy crisis eases, energy prices and inflation expectations may decline, and the Federal Reserve may also shift to a more dovish stance.

AI-assisted interpretation

The following is analysis, separate from reported facts. Verify important claims independently.

A "stealth bear market" refers to a situation in which an index appears to remain near its high, while most stocks within the index have already declined significantly. The article believes that a small number of large technology companies have supported the S&P 500; if energy, inflation, and geopolitical pressures ease, more stocks may participate in the gains. However, this is only a conditional view put forward by the institution.

Why it matters to readers

This view reminds investors that index movements may obscure major differences among constituent stocks. Oil prices, inflation expectations, the Federal Reserve's interest-rate path, and the earnings performance of large technology companies may affect technology-stock valuations and whether market gains can broaden.

Beginners should not conclude that the entire market is strong merely because the S&P 500 is near its all-time high. They should also consider whether gains are concentrated, the extent of individual-stock drawdowns, and the assumptions underlying the relevant forecasts.

Risks and unknowns

The content is BlockBeats' restatement of The Kobeissi Letter's view; the cited market statistics and earnings data are not accompanied in the evidence by original data or independent verification.
It remains unconfirmed whether energy prices, inflation expectations, and the Federal Reserve's stance will change as envisioned by the institution.
It remains unconfirmed whether the Iran war and the global energy crisis will ease.

The Kobeissi Letter believes U.S. equities are in a "stealth bear market"

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