The Nuveen Bear Tracker

The Nuveen Bear Tracker is a guide that informs our discussions and debate around the unique dynamics of the current U.S. equity bear market, how it compares to those past, and when we might be close to a bottoming process. While not an exhaustive list, the six variables in our table have frequently shown turning points near the bottom of past bear markets. The colors are assigned based on our view of whether each variable is signaling we are close to a bottom (green), further away (red) or a mixed picture (yellow).

Each variable, however, does not carry equal significance. We believe the humbling task of calling the market bottom is just as much art as (we like to believe) science – thus a more qualitative approach is warranted.

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November to December update

• U.S. Federal Reserve Policy went from “Further Away” to “Picture Is Mixed” 
• Bond Spreads went from “Picture Is Mixed” to “Further Away”
  
   

Since our last update we have seen a softening in inflation readings while equities have staged something of a late-year rally. 

Our latest update follows the Fed’s fifth hike in a row, although at their December meeting the FOMC chose to raise rates by just 50 bps, rather than the 75 bps we saw at the prior four meetings. This slowdown in hiking, coupled with softer inflation leads us to believe that most of the hikes are behind us now, and that there is a path to pausing starting to emerge. As such we have shifted Fed policy to neutral. 

While we have seen fixed income spreads tighten by 16 bps since our last update, we have shifted spreads to Further Away. We see current spread levels as indicating a very optimistic picture for credit, despite growing fears of a recession for 2023. We believe that spreads will widen out as the credit picture deteriorates, although not to a concerning degree.