Shortest Bear Market in History…or a Short Pause?

At the tail end of last week, the mainstream financial news trumpeted the rebound. We were told, this was the shortest bear market in Wall Street history. (A bear market is when a stock index loses more than 20% in a short period of time.)

These pronouncements came after Wall Street enjoyed its strongest one week gains since a big rebound week during the GFC. The S&P 500 ended up losing 3.4% on Friday, yet still finished the week up 10%.

Here in Australia, the ASX 200 had its best three day performance since inception. The index gained 12.5% between Tuesday’s opening bell and Thursday’s closing bell.

Not bad if you’re an active trader with a functional crystal ball and were in the market for just those three days.

Not quite so good if you’re a mere mortal and were invested for the entire week. With heavy selling dominating on Monday and Friday, the ASX 200 finished the week a mere 0.5% higher.

Now a gain is a gain. We’ll take what we can get. And at time of writing the ASX is again in the green, up 3.8%.

But let’s not lose perspective here. It’s still down 29.3% since the recent 20 February peak.

And for some longer-term perspective have a look at the yearly chart for the ASX 200 below:

Source: Google Finance

On the far left side you can see the savage sell-off following the global financial meltdown in late 2007. On the far right side you can see the steep losses suffered since the true potential impact of the coronavirus began to crystallise.

We haven’t reached post GFC lows yet. That would require another 32% fall from here.

But notice how much steeper the fall is than during the GFC inspired panic selling.

Also notice that if you’d invested an equal amount in Australia’s top 200 stocks back on 26 October 2007, you’d be nursing a 26.9% share price loss today.

Now maybe the worst of the coronavirus stock market losses have already occurred.

Or maybe not.

Yes, the stock market is just that…a market of stocks. Some medical, technology and essential services stocks may weather the storm well. As may gold stocks. A few may even rise in a freefalling market.

However, now is not the time to go blindly snapping up ‘bargains’. That time will come. But for now, proceed with extreme caution.

PS: While most every stock has come under selling pressure in recent weeks, The Rum Rebellion editor Vern Gowdie lists five stocks he believes you should consider selling immediately. You can find out which ones, and why, in his free special report here.


Bernd Struben is an Editor of The Rum Rebellion. In this capacity, he has access to one of the most intriguing and powerful networks of practical investment insight anywhere in the world. Bernd has worked on four different continents, and has more than 20 years of professional finance, editorial, and management experience. He holds a degree in economics.


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