Suppose you left on vacation the last week of June and came home this week. You would have missed a bear market. Not a long one. Not a subtle one. A complete one, beginning to end, while you were looking at a lake.
The PHLX Semiconductor Index — the main scoreboard for chip stocks — closed at a record on June 22. It then fell nearly 29%. A drop of 20% or more is what Wall Street calls a bear market, so this one qualified with room to spare. It bottomed on July 29. As of this week it has climbed 19.2% off that low — a hair short of the 20% rise that would officially call the whole thing off.
The entire fall took 19 trading days. The average bear market takes 54. Had this one finished on schedule, it would have been the shortest since early 2020.
The Arithmetic
| The round trip | Figure |
|---|---|
| Record close | June 22 |
| Peak-to-trough decline | nearly 29% |
| Rebound off the July 29 low | +19.2% |
| Length of the decline | 19 trading days |
| Average bear market | 54 sessions |
| After the January 2024 exit — six months | +64% |
| After the January 2024 exit — one year | +141% |
Those last two rows are the case for optimism, and it is a real one. The last time this index climbed out of a bear market, in January 2024, it gained 64% over the next six months and 141% over the next year. That is a spectacular record.
It is also a sample of one. A single past episode is a story, not a probability. Anyone quoting you the 141% as though it were a forecast is selling something.
The case for caution is quieter and lives in the math. A 19.2% gain off a low does not undo a 29% fall, because percentages do not run both directions at the same speed. The index has not made a new record. It has made a strong recovery from a hole it dug in three weeks.
Seoul, Only Louder
South Korea’s main stock index, the Kospi, entered a bull market on Thursday — up nearly 22% from its July 30 bottom, including a 3.6% jump on Thursday alone. The whole climb took a little over 10 trading sessions.
The index is up 62% for the year. At its best stretch, the climb ran 116%. Samsung Electronics and SK Hynix did most of the lifting, which is another way of saying the Kospi has become a memory-chip index that happens to include other companies.
JPMorgan (JPM) thinks the rally has room to run, with one caveat worth more than the rest of the note: there are fewer leveraged-ETF players this time, so the pace should be slower.
That caveat exists because South Korea recently cracked down on leveraged ETFs — funds that use borrowed money to multiply the market’s daily moves. Regulators took the amplifier away, and the rally still happened, just at a walking pace instead of a sprint. If you want a clean demonstration that leverage changes the volume and not the song, there it is.
We Did Nothing
Here is the part that matters for your money. Across those 19 days down and 10 sessions up, nobody announced that chips had stopped being necessary, and nobody announced they had become twice as necessary. There was no news. There was only positioning — investors changing their bets.
Prices moved that violently because a great many people were standing on the same side of the boat, and then were not. That is a crowded trade taking its pulse, and it is a normal feature of anything everybody agrees about.
Our answer to a crowded trade is not to avoid the theme. It is to own the part of the theme that gets paid whether or not the crowd is having a good week: the toll booths, the equipment makers, the steady repeat revenue. And to refuse anything with borrowed money attached.
A client who called us on July 29 would have been told to do nothing. A client who called this week gets the same answer. Both calls were worth making anyway, because the temptation runs in opposite directions and both temptations cost money.