Median 17 mos 3 I am talking about the year 1929 and the bear market during the Great Depression.I don't say that we are necessarily facing a similar steep bear market as in the years between 1929 and 1932, but when trying to find past bear markets we can compare the current situation to, the year 1929 could be considered a prime candidate. Thirteen S&P 500 bear markets have occurred since 1929.
The Dow Jones industrial average fell a record 507 points, or 22%. Bloodletting may occur during a bear market, in which the value of securities in many sectors may decline rapidly and heavily. In the past few years, valuation didn't matter for a lot of people (at least it seemed that way), but considering that the stock market is currently still trading with a Shiller P/E ratio of 24 (after crashing) should make us cautious as corrections very seldom stopped with the market still trading at such a high CAPE ratio (happened only after the Dotcom bubble).A third aspect we can look at is the regression to the trend - which seems often to go hand in hand with valuation levels, but nevertheless is a different way to look at stock market prices. Aside from World War I, which lasted until November 1918 and had a huge influence on the economy, the CAPE ratio also was extremely low during that time. How Black Monday And The 1987 Crash Developed Let's study what happened in 1987. But on Sept. 1, the Nasdaq reversed from a new high to fall 0.5% in higher volume After a mini-rebound from Sept. 22 to Oct. 5, more distribution days arrived.The Dow Jones Industrial Average acted more or less the same. Sentiment is often a contra-indicator!Value, long-term horizon, dividend investing, long onlyI/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.I wrote this article myself, and it expresses my own opinions. It can take just four or five such distribution days before a bull market ends and a bear market begins. Authors may own the stocks they discuss.
The Dow officially went into a bear market on Wednesday, when it finished the day down more than 20 percent from its all-time high. It took until 2009 before the S&P 500 hit the long-term trendline again.Aside from these three points, there are more differences we can point out.
The S&P 500 and Nasdaq followed suit the following day, as Thursday, March 12, saw the biggest drop in the stock market since the 1987 market crash. Below is the $SPX Daily Chart for every Bear Market (20% drawdown peak to trough) since 1980, 8 of them. Find out in a free investing webinar—register now!Sink your teeth into bigger profits with MarketSmith! Volume screamed higher on the Big Board and on the all-electronic exchange.Due to circuit breakers built into the U.S. financial exchanges today, such a large decline on a single trading session is less likely now. In my opinion, the absolute worst-case scenario would be a drop to the 2009 lows, which would reflect an 80% decline (but I consider that scenario as rather unlikely).While many people seem to be extremely bullish again and assume that we already saw the low on March 23, 2020, I think stocks and the major US indices will drop lower. Although the past few weeks were pretty extreme, Black Monday in 1987 is still holding the record for the biggest one-day drop in the history of the US stock market. Bloodletting: A period marked by severe investing losses. The long-term mean of the CAPE ratio is 16.7, and when assuming that the S&P 500 will return to the mean this would lead to a price target of Additionally, we can use the long-term trendline and assume a regression to the trend. The average S&P 500 bear market decline was 34%.
In order to determine potential targets where the bear market might come to an end, we can use different methods.We can for example use valuation metrics like the CAPE Ratio. Even in 2000, the S&P 500 was trading "only" 128% above the long-term trendline.
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