A recent article in Bloomberg discusses the recent market turmoil within the context of past market downturns, highlighting an ongoing debate about whether the worst of the downturn is over.

“At the heart of the debate is a phenomenon known as a bear-market rally—a period during a protracted downward trend in which equities stage a short-term revival.”

If those on the negative side of the debate are correct, the article says, “investors can expect more declines in the weeks ahead. It’s a persuasive argument, given the backdrop of the coronavirus…But if they’re wrong and the stimulus saves the economy, those on the sidelines risk missing out on a supercharged rebound.”

The article reports that, since 1927, the S&P 500 has seen 14 bear runs with an average duration of 641 days. Within those periods, the index has rallied more than 15% on 20 occasions, as shown in the following chart:

“Catching one of those swings was a profitable business,” the article notes, adding that the typical gain was about 25%. “But to collect that,” it adds, “an investor had to reach into the jaws of a bear that on average doled out a 41% loss, and often much worse.”

The big question, the article concludes, is what happens next—“If this is a bear rally, how long will it be before the bottom of the bear?” Based on the above chart, it took over 600 days from the start of a bear rally until the index bottomed, adding, “and there’s a huge dispersion within that—the longest time was 1,616 days and the shortest was 133 days.”

The article drives home the point that, given the unprecedented nature of this pandemic in modern times, “reading across into the current rebound could be a fool’s errand, of course.” It concludes that, “figuring out if the past will prove prologue in this coronavirus crisis is hard, and more losses could be ahead.”