It is hard to believe that we are currently debating about a potential bubble, since we had a mini-knot and-you-missed-Missed-it-Berenmarkt in April.
That decline feels like an out -of -physical experience because it happened so quickly.
The first week or so from April saw back -to -back down days of -5% and -6%. A few days later, the market rose almost 10% in one day and we were on our way to the races.
These V-shaped meetings feel like a product of the information age where markets move faster than ever and are increasingly being driven by from biter events.
That’s how it is feel at least.
However, if you have been looking at the average path of every bear market since 1950, the current iteration looks pretty close:
It is not perfect, but you get the waterfall drop followed by the great recovery on the other side. V-shaped rallies are nothing new. That’s the norm.
This year we have seen a similar profile in sector performance:
Technology and communication services (in principle tech) both experienced massive drawings earlier this year, but are now each at 20%+ profits for the year. That is another V.
Of course these relationships have not been put in stone. Consumer stocks were also hammered in the recession, but have not seen any similar year-to-date profit.
Bear markets have some symmetry for them, at least in the short term.
In the long term, bull markets versus bear markets are asymmetrical. Things are not in balance.
Look at the win versus lose:
The bear markets are blips.
To be honest, those losses don’t feel any blips when you are in it. Bear markets can be cheeky. Losing money is not fun. If you see a large part of your portfolio evaporating, you can question your common sense as an investor.
And yet … the bull markets completely overwhelm the bear markets.
It’s not even close.
That is the great thing about the stock market. Despite all the bad things that can and will sometimes happen, it still pays to be invested in the long term.
You just have to survive many short transports to get there.
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The best time to invest
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