Foundations: The Fate of the S&P 500’s Worst Stocks, the Y2K Analogue, and Time for Small Caps?

Predicting Long Positions for Performance Through the Next Bear Market

An astute subscriber suggested I look at the truly busted stocks through the S&P 500 breadth lens since those truly busted stocks seem to be in my wheelhouse these days.

Makes perfect sense.

To recap, in last week’s article, I looked at bear markets over the last forty years and analyzed the composition of the record highs reached by the S&P 500 index just before those bear markets began.

Foundations: Performance in the Next Bear Market & the Caldera Under S. Park & Wall

I hope you enjoyed last week’s Short Thoughts piece, The AI Cloud Oligopoly, Stages of Grief & a Flashing Bear Market Indicator.

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That article finished off with this Bear Market Heroes slide, which suggested that if this is 2000 all over again, today’s broken stocks, down more than 20% off their own highs at the recent** October 6th, 2026 S&P 500 Index high**, could be a decent haven through the bear market, even if it lasts years.

Of course, “down more than 20%” leaves some real estate inadequately explored, the existence of which just about every value investor is rather painfully aware.

The subscriber was right to kick some extra curiosity into me.

Never allow me any rest on my laurels!

A Potentially Rich Vein Emerges

So I took the same data, and broke the Broken into two sets - the merely Broken, down 20-40%, and the truly Busted, down more than 40% at the October 6th S&P 500 record high.

The new table is similar. As of the October 6th record day, the members of the S&P 500 are sorted into Leaders, within 10% of their 10-year highs, the Broken 20-40% off their tops, and now the Busted, off more than 40%.

The same is done for the S&P 500 as it stood, repeatedly over the last 4 decades, at record highs set on the precipice of bear markets and near-bear markets.

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Bear Market Heroes II

Below, Bear Market Heroes II, with telling historical snapshots and subsequent performance records of each of these three categories of stocks - Leaders, Broken, and Busted.

**Read more on the Cassandra Unchained web site. **