Jim Cramer Says Most of the Market Is Already in a Bear Market Despite S&P 500 Rally

The S&P 500 just celebrated a four-year bull run, but Jim Cramer says that headline number is hiding something much uglier beneath it. Bank stocks sit at the center of that tension, and their next earnings reports will either confirm…

The bull market that began in October 2022 turned four this week. Jim Cramer marked the anniversary on air by noting that the S&P 500 had gained 117% since the bottom, and in the same segment he argued that bonds, housing, and consumer stocks have already rolled over. “I would argue that either you’re in a bear market or you’re close to a bear market for most of the market,” Cramer said.

The data support both claims. An S&P 500 index fund is up 14.1% this year, but Wells Fargo (NYSE:WFC | WFC Price Prediction) is down 9.13%, and Capital One (NYSE:COF) is down 16.02%, even after both posted strong second-quarter results.

That gap matters if you own bank stocks, because the largest U.S. lenders sit where every force Cramer described comes together. Their earnings show what higher rates are doing to borrowers, while their share prices reflect how differently investors are paying for that strength.

The S&P 500 is weighted by company size, so the largest companies drive most of its return. A few giant winners can lift the index while the median stock falls.

That comes from the math of weighting. One trillion-dollar stock rising moves the index more than dozens of smaller stocks falling together.

Among the banks, Citigroup (NYSE:C) is up 14.76% this year, while Bank of America (NYSE:BAC) is up just 0.82%. The broad financial sector fund has gained 1.73%.

The 10-year Treasury yield reached 5.22% on October 8, and the 30-year hit 5.60%, up 0.35 percentage points in a month.

Cramer mentioned an 8% mortgage, which runs ahead of the published data. The national 30-year average is 7.40%, up 0.69 percentage points in a month and well above February’s 5.98% low.

Short rates are also rising. The fed funds upper bound is 4.00%, up 0.25% from a month ago.

Higher mortgage payments freeze housing turnover. Existing home sales fell to a 3.98 million annual pace in August, which hurts brokers, movers and home-improvement retailers. Wells Fargo’s home lending revenue fell 7%.

A household that owns equities has compounded wealth through this period. A household that rents and carries a card balance pays an average APR of 21.19%.