The Reason for Bear Market Rallies

A recent article in Forbes offers perspective on bear market rallies and why they occur, drawing on historical data going back to the 1930’s. “One question I often get from my articles about bear markets is why bear market rallies occur at all?” it says, adding, “That is, what makes them an essential part of the bull-bear stock market cycle.” The author explains: “In my observations, the key function of a bear market rally is… Read More

S&P 500 Bear-Market Rallies: A Brief History

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… Read More

Excess Returns, Ep. 20: The Limits to Lessons from Past Bear Markets

Whenever we are confronted with a bear market, we all want to figure out how it will play out. We want to know how big the decline will be. We want to know when it will end. We want to know what stocks we should buy to limit losses during it and to outperform the market after it. To answer these questions, our minds tend to point us to the simplest solution we can find.… Read More

Breaking Down What is Among the Most Extreme Sell-Off Wall Street Has Seen

A recent CNBC article provides insights and analysis of the coronavirus-related market sell-off. Here are some highlights: While many sounded alarms when COVID-19 emerged in China, the article says “the swiftness of the economic shutdown and violence of the U.S. market’s 30% drop in a month were not foreseen by many who had not already been wary of the market for other reasons.” Analysts have been comparing historical periods of global pandemic and coinciding market… Read More

The Limits to Lessons from Past Bear Markets

By Jack Forehand, CFA (@PracticalQuant) The current bear market seems just like 2000. We had massive outperformance from growth and technology names coming into it, with small-cap value companies being left behind. And we had well above average valuations going in as well, just like we did here. So that must be the perfect analogue to look at to figure out what happens from here. Actually, on second thought, I see a lot of similarities… Read More

Learning from Buffett and Others During Market Crises

By Justin J. Carbonneau As of this writing, the S&P 500 will have dropped close to 30% in less than 20 trading days. The decline is the fastest drop into bear market territory ever. The degree of health related and economic damage for businesses, profits and employment, a result from fallout of the coronavirus, remains so unknown that stocks in general are getting significantly hit and some industries, like airlines, cruise liners and entertainment concerns,… Read More

Hulbert: The Bull Market is Only Three Months Old

An article in MarketWatch  by columnist Mark Hulbert says the bull market that began in March of 2009 “came to an end long ago. If we’re even in a bull market right now—and that is not for sure—an argument can be made that it’s less than three months old.” Given what Hulbert describes as the “semi-official” definition of a bear market is a 20% decline in one or more of the major market averages,” he… Read More

Should the Coming Yield Curve Inversion Frighten Investors?

A recent article in Forbes discusses the growing buzz about an impending yield curve inversion and the repercussions for the economy and stock market. “Inverted yield curves have successfully warned about each of the seven recessions over the past 50 years,” the article reports, “which is why investors keep an eye out for them.” When an inversion takes place (the difference between short- and long-term yields falls below zero), the article notes, it “warns that… Read More

It’s Hard to Predict Bear Markets

A recent Vanguard blog discusses the challenges faced when trying to predict a market downturn. “While all bear markets involve a loss of investor confidence,” it says, “an assortment of factors can cause them,” including change in monetary policy, political events, and overvalued stocks. Even if you could predict such factors, the article argues, it’s hard to tell how they would affect equities. The article illustrates the differences between the last two bear markets—namely, the… Read More

Tools You’ll Need for the Next Bear Market

By John Reese (@guruinvestor) —  Hoping for the best but preparing for the worst is a good rule-of-thumb, a maxim that can help us stay measured and mindful when it comes to dealing with life’s inevitable ups and downs. But it can be hard to think about potential downs when the ups have been around for a while—and the current, nearly nine-year-old bull market is a perfect example of that. Since March of 2009, the… Read More