How A Valuation Driven Bear Market Looks Like
In this issue:
- Latest in Retirement Savings & Personal Finance
- How A Valuation Driven Bear Market Looks Like
- Market Overview
Latest in Retirement Savings & Personal Finance
U.S. Consumers Still Spending
U.S. shoppers broke records this Thanksgiving and Black Friday.
The highlights (U.S., 2025 vs. 2024):
- Thanksgiving online sales: $6.4 billion, up 5.3%
- Black Friday online sales: $11.8 billion, up 9.1% and a new record
- Total Black Friday spending (online + in-store): Up 4.1% (Mastercard)
- In-store traffic: Down 3.6%, showing a continued shift to online shopping
- Buy Now, Pay Later (BNPL): Usage rose about 9%, as more shoppers used flexible payment options amid ongoing inflation
In short, Americans spent a bit more than last year after taking a 3% or so inflation into account. However, if consumer goods prices were affected more greatly due to the tariffs, the actual spending might be even lower.
Mortgage Rates Declined in November
In November 2025, U.S. 30-year fixed mortgage rates showed a slight decline from earlier in the year, reaching 6.2%. The moderation reflects a lessen concerns on inflation and a possible further interest rate cut.
Tariffs Roll Back on Hundreds of Food Items
In an effort to make things a bit more affordable and maybe cool down inflation, the Trump administration moved to roll back tariffs on more than 200 food products. Things people actually buy all the time, beef, coffee, bananas, a whole range of fruits and spices. There was also a separate order that removed the 40 percent tariffs on some Brazilian agricultural imports. That included beef, coffee, cocoa and a few other fruits that only had those extra costs put on earlier this year. The change is retroactive for anything coming in after November 13, so some importers might even get refunds on duties they already paid. Consumers might notice it. Importers too.
So this is something people can probably feel in their bottom line, maybe not right away but soon enough.
How A Valuation Driven Bear Market Looks Like
The following is a summary of a discussion in our December premium newsletter. We give out the summary on this because we believe it’s valuable for every retirement investor to understand the current stock market by comparing it with the dot com tech bubble in 2000.
Background
Michael Burry, the famed investor who bet against the housing market in 2008, has now turned his latest crusade toward the current AI bubble. Given his credibility and his sharp ability to read company finances, we have to ask where the current AI bubble actually is, if there is any at all, since this is quite important for any upcoming correction or bear market. As always, there will be one for sure, it is only a matter of when, not if.
We will draw some lessons or observations from the dot com bubble burst period from 2000 to 2003 first.
The year 2000 dot com tech bubble burst
Unlike other bear markets that are usually led by economic recessions (such as in 2008), the tech bubble burst was unique because it was mostly driven by extreme stock valuation compression, which eventually caused an economic recession.
Here is the chart:
Observations:
- S&P500 price peaked in March 2000
- However earnings were still growing strong, at about 15% annual rate
- Earnings finally flipped to negative in the first quarter 2001, after S&P500 index price had declined about 20% from its peak in 2000
- The S&P 500 reached its trough in October 2002.
- However, it continued to wobble until March 2003, which is the official end of the bear market.
Current Situation
- Earnings still growing
- The economy is still relatively healthy
- But we have a very different or almost opposite monetary and fiscal policies, compared with 2000.
Takeaway
- The current bubble could burst at any time, given the extreme stock valuation level at the moment. It does not need an economic recession to begin such a bear market. The year 2000 bear market is a good example.
- Furthermore, in a valuation compression induced bear market like in 2000, stock prices could decline before and after the economic recession. The current situation is most likely to develop into such a valuation compression bear market or a mean reversion bear market, unlike a typical cyclical bear market led by economic recession or weakness. If the current situation turns out to be a similar bear market, we should expect the price behavior to be similar. In other words, be prepared for a severe and prolonged downturn with severe drawdowns.
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Market Overview
On the surface, stock indexes experienced some correction in November: The S&P 500 index had about 5% drawdown and now mostly have recovered. But many speculative AI stocks like IREN, CRWV have had much larger correction.
The following table shows the major asset price returns and their trend scores, as of last Friday:
| Asset Class | 1 Weeks | 4 Weeks | 13 Weeks | 26 Weeks | 52 Weeks | Trend Score |
|---|---|---|---|---|---|---|
| US Stocks | 1.6% | -0.5% | 5.7% | 15.4% | 13.9% | 7.2% |
| Foreign Stocks | 1.9% | -0.5% | 5.1% | 11.6% | 24.4% | 8.5% |
| US REITs | 0.5% | 1.3% | -1.2% | 2.8% | -3.2% | 0.0% |
| Emerging Market Stocks | 1.3% | -1.6% | 6.0% | 15.3% | 21.8% | 8.6% |
| Bonds | -0.3% | 0.0% | 1.6% | 4.4% | 4.7% | 2.1% |
More detailed returns and trend scores can be found on MyPlanIQ.com Market Overview.