+

Cookies on the Business Insider India website

Business Insider India has updated its Privacy and Cookie policy. We use cookies to ensure that we give you the better experience on our website. If you continue without changing your settings, we\'ll assume that you are happy to receive all cookies on the Business Insider India website. However, you can change your cookie setting at any time by clicking on our Cookie Policy at any time. You can also see our Privacy Policy.

Close
HomeQuizzoneWhatsappShare Flash Reads
 

Here's what happened the last 10 times the stock market disintegrated into a bear market

Jan 6, 2016, 19:50 IST

A young Canadian man wrestling a bear in the 1920s.Wikimedia Commons

No one wants to dwell on the bad times, but sometimes it's important to look back to know what the future may hold.

Advertisement

In JPMorgan Asset Management's massive guide to global markets, David Kelly and his team included a look at the past 10 times the US stock market has headed into a bear market.

Defined as a 20% drop from the most recent S&P 500 all-time high, bear markets are associated with 4 macro indicators: recessions, commodity spikes, aggressive Fed tightening, and/or extreme valuations.

The most common factor was a recession, unsurprisingly, which has coincided with a bear market 8 times. This was followed by extreme valuations (5 times), commodity spikes and surprising, aggressive Fed tightening cycles (4 a piece).

Currently, the chart doesn't seem to indicate that Kelly believes any of the situations exists today. There is no official recession, commodities have crashed instead of spiked, and the Fed has only just begun to raise rates. The only debatable metric is extreme valuations, and that alone has only brought down the market once, in 1961.

Advertisement

Despite that, it's probably good to keep the past in mind.

NOW WATCH: JIM CRAMER: These are the best and worst stocks for 2016

Please enable Javascript to watch this video
You are subscribed to notifications!
Looks like you've blocked notifications!
Next Article