Register For Our Mailing List

Register to receive our free weekly newsletter including editorials.

Register

18 May 2024

Home / 351

Every bear is different

The COVID-19 bear market hit severely, with the 34% fall in the S&P500 from 19 February 2020 to 23 March 2020, making it the quickest collapse in history. A bear market is usually defined as a 20% fall in a market index, and in March 2020, this took only 20 days.

Compared with other bears, however, there are reasons this bear market could be shorter. There has already been a strong recovery, although clearly this could be a bear market rally.

This short article compares the latest falls with previous bear markets, noting the one thing they all have in common – they end.

Consider the following chart of bear markets in the Australian All Ords Accumulation Index. 

  • Every bear market is different in terms of its speed and duration of falls, and how long they last.
  • In a bear market, panic selling of assets turns mark-to-market, or paper losses, into real losses.
  • The nature of each bear market is determined by the initial shock that triggered them (demand or supply side) and the quality of the policy response (weak versus strong).
  • The COVID-19 bear market was triggered by a supply side shock that quickly escalated into a profound demand side shock as health policies saw activity ‘stop’ during the lockdown phase of managing the rate of infection.
  • The policy response to this biological shock has been swift, dynamic and comprehensive. Central banks are providing unbound liquidity and fiscal policy is helping economies ride through to when infection rates begin to fall or a vaccine is close.
  • The nature of the COVID-19 biological shock helps explain the speed and depth of fall in the Australian share market compared to other bear markets.
  • The vigorous policy response and finite nature of the event suggests that this bear market will have more of a ‘U’ shape and be shorter in duration than other bear markets.

All Ordinaries Accumulation Index (100=cycle peak) in previous bear markets 

Source: Janus Henderson, does not include the subsequent rise in the All Ords of about 15% to end March 2020.

 

Frank Uhlenbruch is an Investment Strategist in the Janus Henderson Australian Fixed Interest Team. This article is general information and does not consider the circumstances of any investor.

 


 

Leave a Comment:

RELATED ARTICLES

Bear markets don't go paw-in-paw with recessions

Suddenly, the market cares if a company makes money (again)

Four stages of a typical bear market - but is this typical?

Firstlinks is sponsored by:
banner

Most viewed in recent weeks

Are term deposits attractive right now?

If you’re like me, you may have put money into term deposits over the past year and it’s time to decide whether to roll them over or look elsewhere. Here are the pros and cons of cash versus other assets right now.

Uncomfortable truths: The real cost of living in retirement

How useful are the retirement savings and spending targets put out by various groups such as ASFA? Not very, and it's reducing the ability of ordinary retirees to fully understand their retirement income options.

How retiree spending plummets as we age

There's been little debate on how spending changes as people progress through retirement. Yet, it's a critical issue as it can have a significant impact on the level of savings required at the point of retirement.

Where Baby Boomer wealth will end up

By 2028, all Baby Boomers will be eligible for retirement and the Baby Boomer bubble will have all but deflated. Where will this generation's money end up, and what are the implications for the wealth management industry?

Is Australia ready for its population growth over the next decade?

Australia will have 3.7 million more people in a decade's time, though the growth won't be evenly distributed. Over 85s will see the fastest growth, while the number of younger people will barely rise. 

20 US stocks to buy and hold forever

Recently, I compiled a list of ASX stocks that you could buy and hold forever. Here’s a follow-up list of US stocks that you could own indefinitely, including well-known names like Microsoft, as well as lesser-known gems.

Latest Updates

Property

Financial pathways to buying a home require planning

In the six months of my battle with brain cancer, one part of financial markets has fascinated me, and it’s probably not what you think. What's led the pages of my reading is real estate, especially residential.

Meg on SMSFs: $3 million super tax coming whether we’re ready or not

A Senate Committee reported back last week with a majority recommendation to pass the $3 million super tax unaltered. It seems that the tax is coming, and this is what those affected should be doing now to prepare for it.

Economy

Household spending falls as higher costs bite

Shoppers are cutting back spending at supermarkets, gyms, and bakeries to cope with soaring insurance and education costs as household spending continues to slump. Renters especially are feeling the pinch.

Shares

Who gets the gold stars this bank reporting season?

The recent bank reporting season saw all the major banks report solid results, large share buybacks, and very low bad debts. Here's a look at the main themes from the results, and the winners and losers.

Shares

Small caps v large caps: Don’t be penny wise but pound foolish

What is the catalyst for smalls caps to start outperforming their larger counterparts? Cheap relative valuation is bullish though it isn't a catalyst, so what else could drive a long-awaited turnaround?

Financial planning

Estate planning made simple, Part II

'Putting your affairs in order' is a term that is commonly used when people are approaching the end of their life. It is not as easy as it sounds, though it should not overwhelming, or consume all of your spare time.

Financial planning

Where Baby Boomer wealth will end up

By 2028, all Baby Boomers will be eligible for retirement and the Baby Boomer bubble will have all but deflated. Where will this generation's money end up, and what are the implications for the wealth management industry?

Sponsors

Alliances

Site Map

About Firstlinks

© 2024 Morningstar, Inc. All rights reserved.

Disclaimer
The data, research and opinions provided here are for information purposes; are not an offer to buy or sell a security; and are not warranted to be correct, complete or accurate. Morningstar, its affiliates, and third-party content providers are not responsible for any investment decisions, damages or losses resulting from, or related to, the data and analyses or their use. To the extent any content is general advice, it has been prepared for clients of Morningstar Australasia Pty Ltd (ABN: 95 090 665 544, AFSL: 240892), without reference to your financial objectives, situation or needs. For more information refer to our Financial Services Guide. You should consider the advice in light of these matters and if applicable, the relevant Product Disclosure Statement before making any decision to invest. Past performance does not necessarily indicate a financial product’s future performance. To obtain advice tailored to your situation, contact a professional financial adviser. Articles are current as at date of publication.
This website contains information and opinions provided by third parties. Inclusion of this information does not necessarily represent Morningstar’s positions, strategies or opinions and should not be considered an endorsement by Morningstar.