The duration of bear markets

I've been following this regularly lately Corona dashboard of Hopkins University. The creators have recently revised the presentation here and you can now easily follow the progress of the Coronvirus in all sorts of countries. While some countries such as South Korea and Germany appear to be on the right track, others such as the US and Brazil may have the worst yet to come. After all, the number of daily new infections over the past weekend has remained constant for the time being. Nevertheless, after more than 40 % slumps in the Dax from 13,795 points to 8255 points, we in Germany have now clearly slipped into a review. This is not a nice experience for any of us, and since we want to get out of this situation as soon as possible and get back to work as normal, I've pulled together some data showing how long bear markets have lasted in the past.

Now that we know which passive income streams are the best, how to be sovereign in a crisis stays and which ones Benefits that can be drawn from the corona crisis – next is what duration bear markets have had in the past. So you know what to expect.

The good first: The duration of bear markets was a manageable year and a half. Often it was only a few months.

Daily new corona infections worldwide. Source: Hopkins University


Daily new corona infections worldwide. Source: Hopkins University
Daily new corona infections South Korea. Source: Hopkins University
Daily new corona infections South Korea. Source: Hopkins University
Daily new corona infections in Germany. Source: Hopkins University
Daily new corona infections in Germany. Source: Hopkins University

First step done? ⇾ Plateau in new infections

The data is still relatively fresh, but last weekend we managed to ensure that new infections with the corona virus remained constant worldwide. This corresponds to a growth rate of 1.0. This is an important step because even if the number of newly infected people continues to rise sharply, the data suggests that the exponential growth seems to have been broken. That cannot be said for sure at the moment, since two days of plateau are not enough for that. The plateau could also be explained by the fact that fewer people go to the doctor at the weekend and get a diagnosis. But one thing is clear: for the first time since the beginning of the global pandemic, the trend is developing in a more positive direction.

>> You can read here which details you as an investor should know in the corona crisis. <<

The duration of bear markets is 18 months - a bull market lasts 5.5 times as long!

A reaction with panic and fear would be just as negligent in the current situation as indifference. So let's stick to the facts. Let's look at the US heavyweight - the S&P 500: The shortest bear market in the more than 100-year history lasted a little longer than three months. That was the crisis in 1987. Long crises were the world economic crisis in 1929 with 2.8 years and the bursting of the dot-com bubble in 2000 with 2.5 years. In the following representation of J.Sibers shows the bull and bear markets of the world's oldest stock market - the USA.

Die Dauer von Bullen- und Bärenmärkten von 1903 -2016 in den USA im VergleichDauer von Bärenmärkten #Über 100 Jahre Daten
Bulls and Bears from 1903-2016 in the US – Over 100 years of data. Data Sources: Robert Shiller's Data Library. Calculations by Newfound Research. Definition: Bull markets are defined from the lowest close price reached after the market has fallen 20 % or more to the next price high. Bear markets are defined as a price decline of 20 % or more. Monthly data was used for these calculations. link to source. Modification: Konto-Kredit-Vergleich.de

It's easy to see that historically, bull markets have always lasted significantly longer than bear markets. Since it might be interesting for you how long the bull and bear markets lasted on average, I have created a small table. This allows you to make an assessment of what you have to prepare for in the 2020 corona crisis.

Die Dauer von Bullen- und Bärenmärkten von 1903 -2016 in den USA. Durchschnittlicher Bärenmarkt: 1,5 Jahre; Durchschnittlicher Bullenmarkt: 8,1 Jahre#Über 100 Jahre DatenDauer von Bärenmärkten
Duration of bull and bear markets from 1903 -2016 in the USA. Average bear market: 1.5 years; Average bull market: 8.1 years
#Over 100 years of data

The table shows that bear markets lasted about a year and a half, or 17.5 months, on a long-term average. In contrast, the bull markets ran for an average of 8.1 years. That's 5.5 times longer!

For those who if the cannons thunder want to buy cheaply, it's good to keep that in mind.

Stock market downturns in the US lasted about a year and a half. Sometimes it was only a few months.

We can derive this from over 100 years of historical data

The new bull market and the derivative

Es wird einen neuen Bullenmarkt () geben. Daran besteht kein Zweifel. Meine Prognose ist, dass dieser beginnen wird, wenn sich die Lage halbwegs stabilisiert hat. Auf jeden Fall wird es sein bevor alles in trockenen Tüchern ist und es absolut glasklar ist, dass sich die Lage nun entspannt. Dies hängt damit zusammen, dass die Märkte stets Hoffnungen und Ängste mit einpreisen. In gewisser Weise verhalten sich Aktienmärkte damit wie die erste oder zweite Ableitung einer Funktion. Sobald eine Trendumkehr der Situation absehbar ist, haben Anleger Hoffnung oder Angst. Dies lässt die Märkte bereits ausschlagen bevor die Situation eingetreten ist.

The Chinese market, represented by the Shanghai Composite (SSE), stopped falling as new coronavirus infections were just beginning to decline. At the time, it was by no means foreseeable with certainty whether they would decline permanently or rise again shortly thereafter. At that time, the cumulative number of cases was just beginning and numerous people were still infected with COVID-19. However, the lockdown was already having an effect and investors had hope that the situation would soon return to normal.

The following picture shows the connection: The stock markets are already starting to recover when the new infections fell minimally. The situation was by no means under control at the time. The stock markets react to trends and behave in a mathematical sense, therefore comparable to the derivation of a function.

Duration of Bear Markets: The Good News

Since the number of infections seems to have reached a plateau for the time being, it could be a short time before the stock markets recover. Finally we saw that it was similar in China! In the short term, however, high volatility is to be expected due to the panic situation. Another piece of good news from the past is that the sharper the slump, the faster the stock market recovery tended to be. And the setback in 2020 by more than a third has already washed itself out! In China, the virus spread was under control after three months. On 03/23 the Chinese government is easing curfews again.

Therefore, this crisis offers a mega opportunity and numerous advantages – not only financially. The prerequisites are staying power and being able to keep your feet still.

one further amendment

With this article I assume that Blog parade by Jürgen from the ETF blog on the topic of "Private wealth creation in Corona times". You can find articles by other authors in under the link on Jürgen's ETF blog.

Depot recommendation to buy cheaply in the corona crisis: Smartbroker*

Released in December 2019 SmartBroker* on the screen. Behind it is wallstreet:online capital AG. Co-owner of wallstreet:online one of the largest German-speaking finance and business portals.

It is a free depot where for 4 euros per order can be traded. In contrast to Trade-Republic, you can trade with Smartbroker on all German stock exchanges. There is also access to 18,000 funds with no front-end load. In addition, the provider has announced the Trading fee to 0 euros to lower.

Smarbroker offers this

  • No custody fees
  • 4 EUR per order (planned are commission-free trading)
  • Trading on all German stock exchanges
  • 18,000 funds with no sales charge
  • Free currency accounts
  • Securities loan from 2.25% pa
  • In cooperation with DAB (based in Germany with deposit insurance)

You trade on all German stock exchanges via Smartbroker, in direct trading via Lang&Schwarz and internationally on the respective home stock exchanges. The main advantage of the smart broker compared to Trade Republic are the following three reasons:

  • Trading possible via real exchange
  • Trading via desktop PC possible
  • The popular Vanguard funds are available in the savings plan
Big advantage of the Smartbroker depot: 15 saveable Vanguard ETFs are available. Source: JustETF.com
Big advantage of the Smartbroker depot: 15 saveable Vanguard ETFs are available. Source: JustETF.com

Savings plans at Smartbroker

Smartbroker has a comprehensive range of savings plans. In addition, these are relatively affordable at 0.20% (at least 0.80 euros) per version, although other providers have better offers here.

  • 604 savings plan eligible ETFs
  • established providers: Amundi, iShares, Lyxor, comstage, BNP Paribas, Xtrackers, Vanguard, SPDR, UBS, HSBC, Invesco, DEKA, etc.
  • particularly cheap: only 0.20% (at least 0.80 euros) per version
  • already possible from 25 euros per version
  • Savings plan execution: monthly, bimonthly, quarterly and semi-annually possible

ETF savings plan campaign at Smartbroker

The provider goes after customers and offers 295 savings plan ETFs completely free at. This includes ETFs from providers Amundi, XTrackers, Lyxor and iShares. Too bad there are no Vanguard ETFs. If you want to save on Vanguard ETFs as cheaply as possible, the best thing to do is go to the DKB. In the DKB* Vanguard savings plans can already be implemented for a flat fee of 0.49 euros. The provider shows once again that it can definitely stand up to newcomers to the industry.

The disadvantage is that Smartbroker also charges penalty interest of 0.5 % on cash deposits. However, only if the cash quota is more than 15 % in relation to the portfolio value. The quarterly average is taken as the basis. The penalty interest/custody fee is only charged on the part that is above the 15 % cash quota. New customers are exempt from the fee for the first three months.

 

 

*Affiliate link: If you get to a provider via one of these links from my website, I may receive a commission. This does not result in any additional costs for you. ❤️ THANK YOU for using these links! ❤️

Disclaimer: This is well researched but non-binding information.

Icons made by mynamepong from www.flaticon.com

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