Ann: Market Update, page-83

The Nature of the Beast

History suggests there are three types of bear markets. Goldman Sachs calls these the structural, cyclical and event-driven bear markets.

A structural bear market is triggered by structural imbalances and financial bubbles. Very often there is a “price shock”, such as deflation, which follows.

Cyclical bear markets are typically a function of rising interest rates, impending recessions and falls in profits. They are a function of the economic cycle.

Event-driven bear markets are triggered by a one-off “shock” that does not lead to a domestic recession (such as war, oil price shock, emerging market crisis or technical market dislocation).

Yes, I know what you’re thinking. Clearly the coronavirus is a one-off shock but global recession is now inevitable. Goldman Sachs (in a report published March 9) applies caveats in this particular case, In short, this time it’s different.

For the record:

Structural bear markets on average see falls of -57%, last 42 months and take 111 months to get back to starting point in nominal terms (134 months in real terms);

Cyclical bear markets on average see falls of -31%, last 27 months and take 50 months to get back to starting point in nominal terms (73 months in real terms);

Event-driven bear markets on average see falls of -29%, last 9 months and recover within 15 months in nominal terms (71 months in real terms);

…Goldman informs us.

https://hotcopper.com.au/threads/what-does-history-tell-us.5307190/?post_id=43700110