Yesterday, the S&P 500 triggered its first Death Cross since March 2022. With a name like that, it’s hard not to take notice — second only, in my opinion, to the Hindenburg Omen when it comes to ominous-sounding market signals…..
So, what is a Death Cross?
It’s when the 50-day moving average dips below the 200-day moving average — a technical sign that short-term momentum has turned weaker than the long-term trend. In theory, this should signal the potential for accelerating declines rather than a market bottom.
But does it actually work?
Since 1950, we’ve seen 37 Death Crosses. While the indicator has managed to flag major bear markets like 1974, the dot-com bust, and the global financial crisis, most of the time it’s far less useful. In fact:
78% of all Death Crosses end with the market higher
The average return during a Death Cross is +2.0%, and
There have only been 4 instances where the S&P 500 was down more than 10% at the completion of the Death Cross.
Bottom line: it’s a poor standalone risk management tool.
If a bear market threatens to derail your financial plan, that’s a sign you may be taking on more risk than you’re truly comfortable with.
