What's a Bear Market and How Long Does it Last?

What's a Bear Market and How Long Do They Usually Last?

Dec 24, 2018

This is huge. Actually, it isn't. I contributed to the article back in March 2018. The signals never fail. I have now learned to predict bear markets at a lag time of a few months and a downside from peak at 10%. That means I usually get out 10% from the top, never at the top. That's good enough as long as the correction is over 20%, I have added value.

The reason for the 20% correction to add value is I am also not able to predict the bottom of the market. Usually, i can only predict the start of a bull after it has risen 10% from the bottom.

http://musingsonwallstreet.blogspot.com/2018/03/signal-for-major-correction-triggered.html

I will personally share what I would do when speak one on one. Now is not a time for broadcast.

I have also spotted certain opportunities even now, and I know they are opportunities because all the talking heads on TV haven't spoken about them.

I think we could see a recession as early as 2020. I don't know. Stupid Trump blamed it on the Fed, but it is not as simple as that. The trade war has bitten into the economy of the world. The US is about to see higher inflation as logistic chains are moved out of China into more expensive countries. Jobs aren't coming back to the US. Those that left never will because there are many more countries with cheaper manufacturing costs. The Chinese will still export to the US all the electronic components, but instead of directly shipping to the US, they will stop by the countries that have Free Trade Agreements with the US. It merely adds to the cost.

The Trade Wars, Government Shut Downs, stupidity of building a wall will cost Trump dear. There will be another recession soon. I think the world has lived on leverage in the past 10 years since QE started, and will suffer the result of the rate hikes.

This recession will be milder than in 2008. I even think that Europe might escape the recession since they are 3 years behind the US in terms of economic cycle.

Another reason for the sell down is the higher rates causing valuations to be adjusted down. Higher discount rates lead to lower multiples. As simple as that.

The whole world is deleveraging. All the money spent on leveraging on stocks will delever. It is happening and the pain will flow through to main street by late 2019.

The article below tells us to brace for a 13 month bear market. If the S&P500 peaked in Sep 2018, then it should bottom in around Oct 2019. 22 months to recover to the Sep 18 peak meant July 2020 will see the stock markets recover the peak. These are merely estimates though and the bear market can be much shorter or longer this time. I will brace myself for another 5 to 10% fall in S&P500 from here on. Emerging Markets have already fallen 28% and should fall at most 10% more.


https://www.cnbc.com/2018/12/24/whats-a-bear-market-and-how-long-do-they-usually-last-.html

We are now in a Bear Market — here's what that means

• A “bear market” is when stocks see a 20 percent decline or more from a recent high — but they’re also marked by overall pessimism on Wall Street.
• Since World War II, bear markets have lasted, on average, 13 months while stock markets tend to lose 30.4 percent of their value.
• During those conditions it usually takes stocks an average 22 months to recover, according to analysis from Goldman Sachs and CNBC.

Kate Rooney | @Kr00ney

Published 13 Mins Ago  Updated 3 Mins AgoCNBC.com

Patrick Endres / Design Pics | First Light | Getty Images

It's helpful to know what a "bear market" is because based on history, it looks like we could be here for a while.

The term on Wall Street is synonymous with serious, long-lasting declines in stock markets. In numeric terms, a bear market is a 20 percent or more drop from a recent peak.

The S&P 500 hit that milestone on Monday, dropping 20 percentfrom its 52-week high. Markets have stumbled through what is usually one of their best months of the year, with indexes on track for their worst December performances since the Great Depressionin 1931.

Aside from a percentage drop, there other, more emotional ways to measure a bear market.

Pessimism tends to prevail. When good news isn't enough to hold off sellers and despite solid economic conditions, markets continue to tank — that's a bear market. The glass-half-full scenario is often overlooked and any positive news seems to be forgotten by the close of trading.

In December, oversold markets have struggled to make a comeback, suggesting that investors are worried about something bigger. Still, economic fundamentals are not giving red flags of a recession, which is usually a necessary condition for a full-fledged bear market.

When do stocks bounce back?

If this bear market is anything like the last time, it could take some time to recover.

Since World War II, bear markets on average have fallen 30.4 percent and have lasted 13 months, according to analysis at Goldman Sachs and CNBC. When that milestone has been hit, it took stocks an average of 21.9 months to recover.

Even when stocks enter "correction" territory, which is defined by at least a 10 percent drop from a recent high, there's a long road to recovery. History shows corrections last four months and equities slide 13 percent before finding a bottom.

Traders have a laundry list of things to watch heading into next year. The Federal Reserve is raising interest rates, making it more expensive to borrow money. Last week, the central bank hiked its benchmark interest for a fourth time this year while Fed Chairman Jerome Powell signaled it would continue to unwind its balance sheet at the current pace.

Investors are also focused on tense trade talks with China, a government shutdown that could last through the end of this week and oil prices.

-- CNBC's Michael Santoli contributed to this report.