Market Bull: S&P 500 Could Fall More Than 30%

The bear market club has won over another long-time bull. According to his InvesTech newsletter, Jim Stack, president of Stack Financial management, who has been a firm stock market bull since 2009, warns investors that we are currently in a bear market that likely has significant downside remaining.

Stack notes that there is no macroeconomic evidence that the U.S. is on the brink of recession, but that fact alone does not mean that stocks are safe from further declines.

"Bear markets historically are a lot more damaging than what investors think,” Stack explained. “Bear markets typically are not just a 20% decline. Bear markets typically take back half or more of the previous bull market gain.”

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In fact, in the last 85 years, only one bear market failed to give back at least half of the previous bull market’s gains.

Stack calculated that a pullback of half the recent bull market’s gains would drop the S&P 500 by 34.1 percent from its all-time high of 2,130 down to around 1,400.

So far in 2016, the SPDR S&P 500 ETF Trust SPY is down 5.8 percent while the iPath S&P 500 VIX Short Term Futures TM ETN VXX has surged 30.6 percent.

Disclosure: the author holds no position in the stocks mentioned.