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
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5 | 125372 | 0.110 |
2 | 203257 | 0.105 |
3 | 26500 | 0.100 |
1 | 15000 | 0.065 |
Price($) | Vol. | No. |
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0.130 | 524598 | 3 |
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