More interesting historical perspective on the magnitude of this cycle's decline in equity markets versus other great bears in the past 100 years. Watch this video clip from John Authers of the Financial Times.
Also this article and chart on the rarity of 12-year lows is interesting.
None of this can be taken as predictive of what comes next, but the longer and deeper this decline the greater the probability that we are nearing its end. Does this mean that those who have lost in the bear will be back to even again soon? No. The math of loss is not so kind. Those that lost 60% will now need gains of 150% to recoup their capital. This will take years not weeks. That is why the primary focus of a valuable investment strategy has to be avoiding down market returns. Up markets are the easy part.
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Thanks for the links, Danielle. I agree with John Authers that the severity of the current bear will depend on how the deflation vs. inflation scenario plays out. As he said, it's down to the economic data.
Hi Danielle,
I respect your thoughts on the market and would like to get your response on the following. It seems that whenever the stock market hits a new low (the Dow and S&P 500), the Fed or govt comes out as a saviour – stimulus packages, TARP, bailing out Freddie and Fannie, then AIG, etc. The stock market has a rally only to decline to a new low. Now recently, President Obama says now's probably a good time to buy stocks, Bernacke appears on 60 Minutes and says the recession will likely end late this year. Over the prior 6 months, Bernacke's statements about the state of the economy have been way off. Do you think it is appropriate for these people to be saying these things? I understand they should have the right to their opinions like everyone else but in their capacities, maybe it's not so ethical for them to express them openly and influence so many people. The economic data is horrendous and I tend to have greater respect for someone like Nouriel Roubibi and his market observations and forecasts. The optimism seems a little suspect to me (kind of like the commentators on CNBC).
Daryl