Event-Driven Bear Markets in U.S. History, 1835-2020

Discuss all general (i.e. non-personal) investing questions and issues, investing news, and theory.
Post Reply
User avatar
Topic Author
SimpleGift
Posts: 3869
Joined: Tue Feb 08, 2011 3:45 pm
Location: Central Oregon

Event-Driven Bear Markets in U.S. History, 1835-2020

Post by SimpleGift » Sat Mar 14, 2020 8:31 am

As a bear market is on our minds these days, I ran across this brief study by Goldman Sachs that may help provide historical perspective. They identified 27 bear markets in the history of the U.S. stock market between 1835 and 2020. These market downturns fell into three broad categories, each with different triggers and characteristics:
  • • Event-Driven Bear Markets (n=5). These are triggered by one-off shocks that don't always lead to a
    domestic recession (e.g., an oil price shock, pandemic, war or emerging markets crisis).

    • Cyclical Bear Markets (n=15). Typically a function of rising interest rates, impending recessions
    and falls in profits. These are the most common bear markets and a normal part of the economic cycle.

    • Structural Bear Markets (n=7). Triggered by structural imbalances and financial bubbles, such as
    in the Great Depression and Great Recession. There's often a price shock, such as deflation, that follows.

Severity of Market Declines
They found event-driven and cyclical bear markets led to average stock market declines of about 30%, while structural bear markets have been much more severe, with an average 57% decline (chart below).
  • Image

Length of Declines and Recoveries
Event-driven bear markets on average reached a market low in about 9 months, compared with over 2 years for a cyclical bear market and nearly 4 years for a structural bear market (first chart below). Also, from their market lows, event-driven bear markets were typically back to their starting nominal value within 15 months on average, compared with 4 years for a cyclical bear market and nearly a decade for a structural bear market (second chart).
  • Image

Discussion: I find these bear market categories to be a good framework for thinking about the current coronavirus pandemic. While on its face, what we're experiencing should be a classic short, event-driven bear market, there are factors that could lead into a longer cyclical bear market. However, there doesn't appear to be the kind of underlying economic or market imbalances today that would indicate a deep, prolonged structural bear market is ahead.

Comments?
Last edited by SimpleGift on Thu May 07, 2020 7:47 pm, edited 3 times in total.

User avatar
JPH
Posts: 1028
Joined: Mon Jun 27, 2011 8:56 pm

Re: Event-Driven Bear Markets in U.S. History, 1835-2020

Post by JPH » Sat Mar 14, 2020 12:09 pm

Very interesting. I hope it is so.
While the moments do summersaults into eternity | Cling to their coattails and beg them to stay - Townes Van Zandt

Retired1809
Posts: 328
Joined: Fri Feb 23, 2007 4:11 pm
Location: North Carolina, USA

Re: Event-Driven Bear Markets in U.S. History, 1835-2020

Post by Retired1809 » Sat Mar 14, 2020 12:12 pm

Thanks for posting.

valuables
Posts: 33
Joined: Fri Feb 07, 2020 7:55 pm

Re: Event-Driven Bear Markets in U.S. History, 1835-2020

Post by valuables » Sat Mar 14, 2020 12:14 pm

This is likely a cyclical+event driven recovery due to where we were in the economic cycle (late boom). So maybe 27+9 for us and 50+15?

lgs88
Posts: 438
Joined: Tue Jun 07, 2016 7:48 am

Re: Event-Driven Bear Markets in U.S. History, 1835-2020

Post by lgs88 » Sat Mar 14, 2020 12:15 pm

SimpleGift wrote:
Sat Mar 14, 2020 8:31 am

Discussion: I find these bear market categories to be a good framework for thinking about the current coronavirus pandemic. While on its face, what we're experiencing should be a classic short, event-driven bear market, there are factors that could lead into a longer cyclical bear market. However, there don't appear to be the kind of underlying economic or market imbalances that would indicate a deep, prolonged structural bear market is ahead.

Comments?
You seem to be the data-master on this forum!

I hope you’re correct, but I wonder whether the vast amounts of corporate debt outstanding at low interest rates might not become a structural issue if they can’t be rolled over at those low rates.

lgs88
merely an interested amateur

alluringreality
Posts: 230
Joined: Tue Nov 12, 2019 10:59 am

Re: Event-Driven Bear Markets in U.S. History, 1835-2020

Post by alluringreality » Sat Mar 14, 2020 12:43 pm

Like the rest of the market, I'm not entirely sure what to make of the current situation. The reaction has been outside the lines of my prior experiences. I find the document interesting, since I don't have a good guess at how exactly this might play out in the long-term.
SimpleGift wrote:
Sat Mar 14, 2020 8:31 am
  • • Event-Driven Bear Markets (n=5). These are triggered by one-off shocks that do not lead to a
    domestic recession (e.g., an oil price shock, pandemic, war or emerging markets crisis).
For anyone that hasn't skimmed it:
"None of the event-driven bear market examples from history were triggered by a virus or other disease outbreak."

I find the document an interesting framework, including the second caveat regarding Event-Driven Bear Markets:
"None of the previous examples were in periods where the starting point of interest rates has been so low (and in some cases negative)."

I expect S&P 500 losses to again exceed 20% in the near-term and agree:
"the fear factor around the economic shock from preventative measures may push markets further down in the meantime".

The recent toilet paper oddity had me thinking about possibilities of inflation:
"Event-driven bear markets have typically emerged with fairly modest inflation."

On the other hand, my other thoughts mostly surrounded items like employment and corporate finance:
"The biggest risk from here in terms of this model is probably in unemployment. Historically, every US recession has been preceeded by a small rise in unemployment. If this were to happen, it would likely imply greater risk of recession and falling profits."
Targets: 15% I Bonds, 15% EE Bonds, 45% US Stock (Mid & Small Tilt), 25% Ex-US Stock (Small Tilt)

User avatar
Topic Author
SimpleGift
Posts: 3869
Joined: Tue Feb 08, 2011 3:45 pm
Location: Central Oregon

Re: Event-Driven Bear Markets in U.S. History, 1835-2020

Post by SimpleGift » Sat Mar 14, 2020 12:53 pm

valuables wrote:
Sat Mar 14, 2020 12:14 pm
This is likely a cyclical+event driven recovery due to where we were in the economic cycle (late boom). So maybe 27+9 for us and 50+15?
Yes, this appears more and more probable. But I'd be cautious about taking the average length of bear market declines and recoveries in the OP at face value. Because this study gathered market data all the way back to the early 1800s, when recessions and bear markets were deeper and more severe, their months of decline and recovery numbers seem longer than we've experienced in the 1900s and 2000s. So I'd be inclined to discount these numbers a bit for the modern era.

However, I do think their basic distinction between event-driven bears (modest losses, short duration), cyclical bears (modest losses, longer duration), and structural bears (deep losses, very long recoveries) still makes good sense.

grog
Posts: 567
Joined: Sat Jul 20, 2013 1:09 pm

Re: Event-Driven Bear Markets in U.S. History, 1835-2020

Post by grog » Sat Mar 14, 2020 1:11 pm

Interesting data, SG. Thanks for sharing.

But I have to wonder if the reduced severity will hold here given that this event severely restricts commerce and the world is much more economically interdependent and the crackdown measures (travel restrictions, etc) will be accordingly more disruptive and expensive. We have really milked efficiency gains from trade, globalization, etc. but it also introduces fragility into the system.

pasadena
Posts: 478
Joined: Sat Jul 02, 2016 1:23 am
Location: Washington State

Re: Event-Driven Bear Markets in U.S. History, 1835-2020

Post by pasadena » Sat Mar 14, 2020 1:15 pm

SimpleGift wrote:
Sat Mar 14, 2020 8:31 am
  • • Event-Driven Bear Markets (n=5). These are triggered by one-off shocks that do not lead to a
    domestic recession (e.g., an oil price shock, pandemic, war or emerging markets crisis).
Thank you, this is interesting, and it makes complete sense to me. While I couldn't really articulate it because I didn't have the data to back it up, it basically explains my feelings about this crash for the past few weeks and why it left me basically unfazed.

What's particularly interesting is how violent these event-driven market crashes seem to be. About the same loss as the cyclical ones, but within a much shorter period of time, both on the way down and the way up. I guess that's because they're mostly driven by fear - both of the event itself, and of the unknown.
SimpleGift wrote:
Sat Mar 14, 2020 8:31 am
  • • Event-Driven Bear Markets (n=5). These are triggered by one-off shocks that do not lead to a
    domestic recession
    (e.g., an oil price shock, pandemic, war or emerging markets crisis).
(emphasis mine)

Now that is what is actually starting to worry me. It sure looks like this pandemic is going to have a sizeable impact on the global economy. Italy is expecting a GDP between -1% and -3% due to this and is clearly one of those countries where it could have a very long lasting impact. Whether the rest of Europe can witthstand it better or not is a question. Same for most emerging markets.

I'm not as worried about the US economy. We will certainly take a big hit, maybe have a negative GDP growth for a while, some sectors more than others (I'm mostly worried about small companies, and the service industry), and some people may have a very hard time recovering from it. But I don't foresee much long term problems. Unless the rest of the world crumbles.
Last edited by pasadena on Sat Mar 14, 2020 6:00 pm, edited 1 time in total.

leemalk
Posts: 9
Joined: Sun Dec 03, 2017 3:29 pm

Re: Event-Driven Bear Markets in U.S. History, 1835-2020

Post by leemalk » Sat Mar 14, 2020 1:23 pm

Thanks for posting this. Always nice to read about historical context and get out of reptilian brain tendencies that are running rampant right now.

User avatar
Topic Author
SimpleGift
Posts: 3869
Joined: Tue Feb 08, 2011 3:45 pm
Location: Central Oregon

Re: Event-Driven Bear Markets in U.S. History, 1835-2020

Post by SimpleGift » Sat Mar 14, 2020 5:30 pm

pasadena wrote:
Sat Mar 14, 2020 1:15 pm
What's particularly interesting is how violent these event-driven market crashes seem to be. About the same loss as the cyclical ones, but within a much shorter period of theme, both on the way down and the way up. I guess that's because they're mostly driven by fear - both of the event itself, and of the unknown.
Right. This is one of the takeaway lessons from the Goldman Sachs study, I believe. Event-driven bear markets are usually characterized by panic selling and irrational pessimism, which tends to blow over fairly quickly once the parameters of the "event" are better understood — then a quick V-shaped recovery.

Today however, even though the coronavirus can be classified as an "event," there's so much else going on in the U.S. economy that it confounds any simple bear market characterization — including the late economic cycle, the end to a long bull market, the oil price war, debt overhangs fueled by historically low interest rates, and the like.

It'll be interesting to see how this bear market evolves, in the context of the historical patterns identified by the study.

saintsfan342000
Posts: 156
Joined: Wed Apr 04, 2018 9:46 pm

Re: Event-Driven Bear Markets in U.S. History, 1835-2020

Post by saintsfan342000 » Sat Mar 14, 2020 5:39 pm

Very interesting. Thanks for sharing. I'll need to read through the whole document when I'm not stuck at home and consequently 6-beers deep social distancing.
Already impartial now

User avatar
grabiner
Advisory Board
Posts: 27188
Joined: Tue Feb 20, 2007 11:58 pm
Location: Columbia, MD

Re: Event-Driven Bear Markets in U.S. History, 1835-2020

Post by grabiner » Sun Mar 15, 2020 6:44 pm

SimpleGift wrote:
Sat Mar 14, 2020 8:31 am
As a bear market is on our minds these days, I ran across this brief study by Goldman Sachs that may help provide historical perspective. They identified 27 bear markets in the history of the U.S. stock market between 1835 and 2020. These market downturns fell into three broad categories, each with different triggers and characteristics:
  • • Event-Driven Bear Markets (n=5). These are triggered by one-off shocks that do not lead to a
    domestic recession (e.g., an oil price shock, pandemic, war or emerging markets crisis).

    • Cyclical Bear Markets (n=15). Typically a function of rising interest rates, impending recessions
    and falls in profits. These are the most common bear markets and a normal part of the economic cycle.

    • Structural Bear Markets (n=7). Triggered by structural imbalances and financial bubbles, such as
    in the Great Depression and Great Recession. There's often a price shock, such as deflation, that follows.

Severity of Market Declines
They found event-driven and cyclical bear markets led to average stock market declines of about 30%, while structural bear markets have been much more severe, with an average 57% decline (chart below).
  • Image
One problem with the definition is that the type of bear market may not be known until it is over. We don't know whether any bubbles will pop in the next few months, but if they do, that will both make the bear market more severe and change it from event-driven to structural. The GS study calls the 1973-1974 bear market structural, but it started with an oil shock.
Wiki David Grabiner

btenny
Posts: 5385
Joined: Sun Oct 07, 2007 6:47 pm

Re: Event-Driven Bear Markets in U.S. History, 1835-2020

Post by btenny » Sun Mar 15, 2020 8:41 pm

I think we are suffering from all three types at once. This COVID19 thing is causing a event driven economic and medical panic that is bad but likely to blow over in 1-2 years. But the OIL price war that was started last week is most certainly the beginnings of a big structural change in the world energy plan. We are awash in oil from fracking especially in the USA. We are starting to use electric cars and trucks. We are starting to use lots of renewable energy. All these things are reducing our need for oil. The last oil price war in the 1970s took decades to restructure. I thing this time will be similar.

And lastly this bear market is the natural ending to the long bull market. It was signaled by the inverted yield curve and interest rate raises that happened last year. This bull started in 2008 and is over due for a draw down after a 12 year run up.

So I see this Bear as really tough and deep and maybe very long.

User avatar
bertilak
Posts: 7523
Joined: Tue Aug 02, 2011 5:23 pm
Location: East of the Pecos, West of the Mississippi

Re: Event-Driven Bear Markets in U.S. History, 1835-2020

Post by bertilak » Sun May 10, 2020 9:22 am

btenny wrote:
Sun Mar 15, 2020 8:41 pm
I think we are suffering from all three types at once. This COVID19 thing is causing a event driven economic and medical panic that is bad but likely to blow over in 1-2 years. But the OIL price war that was started last week is most certainly the beginnings of a big structural change in the world energy plan. We are awash in oil from fracking especially in the USA. We are starting to use electric cars and trucks. We are starting to use lots of renewable energy. All these things are reducing our need for oil. The last oil price war in the 1970s took decades to restructure. I thing this time will be similar.

And lastly this bear market is the natural ending to the long bull market. It was signaled by the inverted yield curve and interest rate raises that happened last year. This bull started in 2008 and is over due for a draw down after a 12 year run up.

So I see this Bear as really tough and deep and maybe very long.
But how can cheap energy be bad for the economy and ultimately for the market? Specific industries (those supplying energy) may be hard hit but ultimately cheap energy has got to be a good thing. Heck, ever-cheaper energy (and more efficient use of it) has contributed to a century-long (or longer) economic boom which we are still experiencing.
May neither drought nor rain nor blizzard disturb the joy juice in your gizzard. -- Squire Omar Barker (aka S.O.B.), the Cowboy Poet

L82GAME
Posts: 242
Joined: Sat Dec 07, 2019 9:29 am

Re: Event-Driven Bear Markets in U.S. History, 1835-2020

Post by L82GAME » Sun May 10, 2020 9:49 am

Thank you, SimpleGift. I always appreciate your posts.

Much to consider, many variables to contemplate, but until there’s a vaccine it’s difficult to imagine a substantive recovery RE: service sector and other face-to-face jobs losses.

User avatar
JoMoney
Posts: 9339
Joined: Tue Jul 23, 2013 5:31 am

Re: Event-Driven Bear Markets in U.S. History, 1835-2020

Post by JoMoney » Sun May 10, 2020 10:09 am

SimpleGift wrote:
Sat Mar 14, 2020 8:31 am
... However, there doesn't appear to be the kind of underlying economic or market imbalances today that would indicate a deep, prolonged structural bear market is ahead...
Hard to say. All of the physical infrastructure and capability of the past economy still exists, but who knows if we'll want to use it the same way. I do think a big part of the economics is based on the psychological "feel" going forward, peoples willingness to normalize or at least find a workable new-normal, is imperative. It's also important to believe the future will be better than the past, and set our path to that future. It's pretty much always been the case that everything we have is what's here, and been here, just a matter of how we choose to allocate and arrange those resources to what purpose, and whether we have a consensus that our new arrangement is getting better than it was before.
"To achieve satisfactory investment results is easier than most people realize; to achieve superior results is harder than it looks." - Benjamin Graham

User avatar
CyclingDuo
Posts: 3295
Joined: Fri Jan 06, 2017 9:07 am

Re: Event-Driven Bear Markets in U.S. History, 1835-2020

Post by CyclingDuo » Sun May 10, 2020 10:12 am

SimpleGift wrote:
Sat Mar 14, 2020 8:31 am
As a bear market is on our minds these days, I ran across this brief study by Goldman Sachs that may help provide historical perspective. They identified 27 bear markets in the history of the U.S. stock market between 1835 and 2020. These market downturns fell into three broad categories, each with different triggers and characteristics:
  • • Event-Driven Bear Markets (n=5). These are triggered by one-off shocks that don't always lead to a
    domestic recession (e.g., an oil price shock, pandemic, war or emerging markets crisis).

    • Cyclical Bear Markets (n=15). Typically a function of rising interest rates, impending recessions
    and falls in profits. These are the most common bear markets and a normal part of the economic cycle.

    • Structural Bear Markets (n=7). Triggered by structural imbalances and financial bubbles, such as
    in the Great Depression and Great Recession. There's often a price shock, such as deflation, that follows.

Severity of Market Declines
They found event-driven and cyclical bear markets led to average stock market declines of about 30%, while structural bear markets have been much more severe, with an average 57% decline (chart below).
  • Image

Length of Declines and Recoveries
Event-driven bear markets on average reached a market low in about 9 months, compared with over 2 years for a cyclical bear market and nearly 4 years for a structural bear market (first chart below). Also, from their market lows, event-driven bear markets were typically back to their starting nominal value within 15 months on average, compared with 4 years for a cyclical bear market and nearly a decade for a structural bear market (second chart).
  • Image

Discussion: I find these bear market categories to be a good framework for thinking about the current coronavirus pandemic. While on its face, what we're experiencing should be a classic short, event-driven bear market, there are factors that could lead into a longer cyclical bear market. However, there doesn't appear to be the kind of underlying economic or market imbalances today that would indicate a deep, prolonged structural bear market is ahead.

Comments?
May as well throw in Morgan Stanley's US Equity Strategist Michael Wilson's comments to the discussion:

Wilson called for markets to bottom on March 16, just a week before the S&P 500 hit its recent low 2,237 on March 23, arguing at that time that the COVID-19 epidemic and simultaneous crash in oil prices were simply the “final blows to an already exhausted U.S. expansion.”

Chart claiming that March 23rd was the end to a two year bear market we had been in...

Image

https://www.marketwatch.com/story/analy ... yptr=yahoo
"Everywhere is within walking distance if you have the time." ~ Steven Wright

Valuethinker
Posts: 40279
Joined: Fri May 11, 2007 11:07 am

Re: Event-Driven Bear Markets in U.S. History, 1835-2020

Post by Valuethinker » Sun May 10, 2020 10:37 am

bertilak wrote:
Sun May 10, 2020 9:22 am
btenny wrote:
Sun Mar 15, 2020 8:41 pm
I think we are suffering from all three types at once. This COVID19 thing is causing a event driven economic and medical panic that is bad but likely to blow over in 1-2 years. But the OIL price war that was started last week is most certainly the beginnings of a big structural change in the world energy plan. We are awash in oil from fracking especially in the USA. We are starting to use electric cars and trucks. We are starting to use lots of renewable energy. All these things are reducing our need for oil. The last oil price war in the 1970s took decades to restructure. I thing this time will be similar.

And lastly this bear market is the natural ending to the long bull market. It was signaled by the inverted yield curve and interest rate raises that happened last year. This bull started in 2008 and is over due for a draw down after a 12 year run up.

So I see this Bear as really tough and deep and maybe very long.
But how can cheap energy be bad for the economy and ultimately for the market? Specific industries (those supplying energy) may be hard hit but ultimately cheap energy has got to be a good thing. Heck, ever-cheaper energy (and more efficient use of it) has contributed to a century-long (or longer) economic boom which we are still experiencing.
Cheap oil is bad for Alberta, and for Saudi Arabia, and for Venezuela and for Russia.

In other words, if you have a larger than average energy industry (oil & gas, chiefly) if the price for these commodities plummets, you lose. Even if say, Japan, which has no domestic oil & gas industry to speak of, benefits. Or a major oil importer like China or India.

So which is the US? Well in the last 10 years or so, due to fracking, it has moved from being net beneficiary to (probably) net loser from a falling oil price. It's a tough call, because the US consumer is still the biggest single user of petroleum products on the planet. Americans drive a lot, and they fly a lot. If you are Union Carbide or another base petrochemicals producer, you are probably a winner. That's a complicated calculation because given that prices of feedstock were/ are higher in other developed countries, the fall might benefit a European or Japanese producer more than it benefits a US producer (that already has relatively cheap feedstock, especially natural gas).

Natural gas prices are not really global. The LNG (tanker born) price has already fallen a lot due to demand destruction (warm winters and now CV-19), completion of major new fields in Australia, Africa and elsewhere, and US becoming an LNG exporter (a side effect of bountiful gas, a side product of oil fracking). US natural gas prices were already among the lowest in the world.

Oil? The US oil sector is taking it on the chin, and it's a big sector now - the US is almost a net exporter of oil.

There's another factor, which is "stickiness" or lag - which macroeconomics struggles to put into nice equations (or rather to recognise that it should), but is there. A downtrend in the oil price is reflected *immediately* in the budgets of oil companies - layoffs, subcontractors idled, capital spending falls, dividend cuts etc.

Conversely the benefits of lower gas (petrol) prices take a lot longer to be felt. For one, Americans are not driving or flying much at the moment. For 2, in a recession they cut back anyways (no work to drive to, no money to go shopping etc). So it takes longer for the improvement in consumer purchasing power to feed through.

Thus on balance the low oil price is probably bad for the US economy, rather than good. A big sector in crisis, and the benefits take a long time to flow thru.

Efficiency? Yes the US economy is a much more efficient user of oil than it was in 1973, say, due to 1). deindustrialisation (the manufacture has moved somewhere else) 2). stopping using oil for power generation (it's 2% or less of all electricity generation, now, vs something like 25% then) 3). less oil for home & commercial heating (mostly now in the Northeast) 4). more efficient vehicles and planes etc.

On greater efficiency of vehicles a lot of that has been eaten up by the shift to heavier SUV-type vehicles and pickups, which now well outsell conventional cars. Worldwide, the gains in fuel economy have been eaten up by the shift to SUVs. Also Vehicle Miles Travelled has risen steadily, with brief dips during recessions. Exception: the post 2008 VMT fall was so protracted that some called it a structural break aka a new era. But, lo and behold, around 2016 it started rising again - just another sign of a very late, long and slow recovery from 2008-09 crisis.

Planes are definitely more efficient (if 1973 a jet plane was say 100 in fuel consumption, I think the number now would be close to 50). However we fly a lot more miles, so our total oil consumption is not lower, but higher.

The Future?

I think EVs are a thing. And going to be a huge thing. But on a global picture, I don't expect them to have moved the needle much in 10 years-- there are already 1 billion+ gasoline (or diesel) powered passenger vehicles out there, and demand in emerging markets keeps growing.

20 years? That's another matter. A number of European countries (Ntherlands, UK) have stated that they will make sales of (new) Internal Combustion Engine cars illegal from 2035 ish.

I think it's a big like digital photography. The new technology floated around for about 35 years without doing much visible harm to conventional film demand. And then, all of a sudden, a tipping point was hit. Polaroid and Kodak would eventually go broke. We are not there yet, but we can see that in 10-20 years the picture might be very different.

Ki_poorrichard
Posts: 148
Joined: Sun Aug 17, 2014 3:40 pm

Re: Event-Driven Bear Markets in U.S. History, 1835-2020

Post by Ki_poorrichard » Sun May 10, 2020 11:16 am

Can anyone confirm or verify a time in history to where the world printed money plus interventions (QE, bazooka injections, negative interest rates, etc.) at the current magnitude or scale? It’s an experiment and we are in uncharted territory.
"We are never certain. We are always ignorant to some degree." - Peter L. Bernstein

minimalistmarc
Posts: 949
Joined: Fri Jul 24, 2015 4:38 pm

Re: Event-Driven Bear Markets in U.S. History, 1835-2020

Post by minimalistmarc » Sun May 10, 2020 11:21 am

Ki_poorrichard wrote:
Sun May 10, 2020 11:16 am
Can anyone confirm or verify a time in history to where the world printed money plus interventions (QE, bazooka injections, negative interest rates, etc.) at the current magnitude or scale? It’s an experiment and we are in uncharted territory.
Human race always moving onwards and upwards, uncharted territory is good, that’s where all the $$$$ are

User avatar
siamond
Posts: 5445
Joined: Mon May 28, 2012 5:50 am

Re: Event-Driven Bear Markets in U.S. History, 1835-2020

Post by siamond » Sun May 10, 2020 11:33 am

I guess this kind of makes sense, but then all stories made up in hindsight are shaped to make sense, and yet the future always has something new in store for us (current crisis being a striking example)... Remind me of a very insightful quote from Daniel Kahneman:
The correct lesson to learn from surprises is that the world is surprising.
Sometimes we just try too hard to find patterns where they don't exist.

User avatar
Topic Author
SimpleGift
Posts: 3869
Joined: Tue Feb 08, 2011 3:45 pm
Location: Central Oregon

Re: Event-Driven Bear Markets in U.S. History, 1835-2020

Post by SimpleGift » Sun May 10, 2020 11:40 am

Ki_poorrichard wrote:
Sun May 10, 2020 11:16 am
Can anyone confirm or verify a time in history to where the world printed money plus interventions (QE, bazooka injections, negative interest rates, etc.) at the current magnitude or scale? It’s an experiment and we are in uncharted territory.
Japan has had negative interest rates since 2016, plus central banks assets over 120% of GDP, all before the virus crisis (in blue, chart below). The Eurozone has also had negative interest rates since 2012 and pre-crisis central bank assets larger than the U.S. (as a percent of GDP). So the scale of global monetary stimulus that we're seeing today with the virus crisis is not exactly unprecedented.
What is different, I believe, is that the current monetary stimulus by the U.S. Fed is an attempt to provide liquidity to financial markets and to help the economy come out of the deep deflationary hole that it's now in. The other monetary programs by Japan and Europe (before the virus crisis) were an attempt to stimulate economic growth — but rather unsuccessfully.

BH+
Posts: 83
Joined: Sat Aug 31, 2019 5:15 pm

Re: Event-Driven Bear Markets in U.S. History, 1835-2020

Post by BH+ » Sun May 10, 2020 11:58 am

A silver lining is that big tech has held up well in terms of earnings so far. That bodes well for the future, given that they have been engines of growth for the bull market in the past decades.

Slick8503
Posts: 273
Joined: Tue Nov 16, 2010 10:25 am

Re: Event-Driven Bear Markets in U.S. History, 1835-2020

Post by Slick8503 » Sun May 10, 2020 6:38 pm

BH+ wrote:
Sun May 10, 2020 11:58 am
A silver lining is that big tech has held up well in terms of earnings so far. That bodes well for the future, given that they have been engines of growth for the bull market in the past decades.
In that light, would love some thoughts from the board on how the earnings growth of the big advertising tech firms, Alphabet and Facebook, can hold up with so many of their advertisers predicted to struggle through this downturn?

Slick8503
Posts: 273
Joined: Tue Nov 16, 2010 10:25 am

Re: Event-Driven Bear Markets in U.S. History, 1835-2020

Post by Slick8503 » Sun May 10, 2020 6:39 pm

BH+ wrote:
Sun May 10, 2020 11:58 am
A silver lining is that big tech has held up well in terms of earnings so far. That bodes well for the future, given that they have been engines of growth for the bull market in the past decades.
In that light, would love some thoughts from the board on how the earnings growth of the big advertising tech firms, Alphabet and Facebook, can hold up with so many of their advertisers predicted to struggle through this downturn?

btenny
Posts: 5385
Joined: Sun Oct 07, 2007 6:47 pm

Re: Event-Driven Bear Markets in U.S. History, 1835-2020

Post by btenny » Sun May 10, 2020 6:42 pm

Well we are almost two months since my last post on this topic. The market is higher than back then but I think that is temporary. I think we are looking at a serious long depression with a economy in taters and no real fixes or good plan in sight to revive things. Leadership is fractured at best. We have huge unemployment of 15% and probably 20% if you count everyone who lost a job. Both numbers are still raising. Unemployment in Hawaii is 35%...... The whole travel and hospitality industries are hammered. We have way too much office space and physical retail space. Our best in the world medical industry has show how poor it performs in crisis and how terrible it is at keeping us healthy. The oil industry needs to shrink and move toward low carbon. We have way too many colleges that are too expensive. ROI on a college degree is poor for many. We need more working people in factories. We now know we should not outsource everything to the low bidder.

I think we are in for a long deep crash and longer recovery and restructure in many parts of the economy. We need to learn to do things different. I just hope it is not too deadly.

Good Luck.

Post Reply