By Paul J. Lim
October 16, 2014

It’s impossible to say if the recent plunge in the market is the start of a full-on downturn, or if it’s just a bout of short-term angst.

But if this does turn out to be an an official bear market, defined as a sustained drop of 20% or more, you can blame the Chinese e-commerce giant Alibaba and its celebrated initial public offering on Sept. 19.

That’s what famed bond fund manager Jeffrey Gundlach told CNBC earlier this week. Indeed, since Alibaba went public about a month ago, the broad market has lost almost all of its gains since the start of the year. And Alibaba itself has lost nearly 10% of its value.

BABA data by YCharts

But it’s also what history says.

Bull markets are born at a time of fear, but as they mature, greed sets in. And at the top of the market, investors try to get their mitts on one last pot of gold.

That’s why many of history’s biggest downturns coincided with celebrated IPOs that exemplified the themes of the prior bull market.

You’ll recall, for instance, that in the summer of 2007, just as the financial crisis was getting going — and just months before the start of the 2007-2009 bear market — the private equity and financial services firm Blackstone Group went public … and proceeded to get hammered.

^SPX data by YCharts

And before that, in April 2000, AT&T Wireless went public just days after the market peaked on March 24, 2000.

In Alibaba’s case, the company exemplified the hot themes that had been driving the five-and-a-half-year-old bull market. That is, exposure to technology, mobile, social media, and China.

But all of that may prove to have been too much of a good thing.

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