Skip to main content

A global bear market in shares

The global bear market in shares continues, as Bloomberg reports that nearly all of the countries in the MSCI World Index and MSCI Emerging Markets Index have entered bear market territory, as they define it.

"All of the 23 developed nations in the MSCI World Index except for Canada have experienced bear-market plunges of 20 percent or more since September as credit losses surged and record commodity prices stoked inflation. Brazil last week became the 23rd out of 25 developing countries in the MSCI Emerging Markets Index to enter a bear market. Only Jordan and Morocco avoided such slumps."

Of course, Bloomberg, like almost everyone else these days, is using the 20 percent rule (a drop of 20 percent from the price high) as their threshold for determining bear markets. Of course, if you're using this arbitrary marker as a guideline, you're likely to find that you've already seen (and sat through) a substantial portion of the average bear market decline.

So let's get a trader's definition of a bear market. The following definition is taken from Victor Sperandeo's book, Trader Vic - Methods of a Wall Street Master.

"Bear market - A long term downtrend (a downtrend lasting months to years) in any market, especially the stock market, characterized by lower intermediate lows (those established in a time frame of weeks to months) interrupted by lower intermediate highs."

Boom, there you have it. Lower highs, lower lows, upmoves usually made on diminishing volume, downlegs accompanied by expanding volume. That's a bear market. Forget all this "20 percent" nonsense.

And by the way, go check out Vic's book if you haven't already; lots more on identifying and classifying bull and bear markets here, and that is just a very small part of an excellent book which covers the principles of speculation, trading psychology, economic principles, and more.

Back to the lecture at hand: ever since the S&P 500 dipped below the magical 20 percent mark in July, the global bear market has been confirmed in the minds of journalists and US market watchers.

Still, while most major global indices are in the midst of longer-term downtrends, Deepak Mohoni notes that "most global indices are also in intermediate uptrends", and that the "major global markets have held on to their intermediate uptrends". So far, so good, but the longer-term trend for many of these markets seems decidedly bearish.

For those who would like a further view of this year's global stock market returns, please see Bespoke Investment Group's global stock markets performance table, as well as Investment Postcards' recent stock market performance round-up. You may find some bright spots here and there!

Popular posts from this blog

Seth Klarman: Margin of Safety (pdf)

Welcome, readers! Signup for free email updates at the Finance Trends Newsletter . Update: PDF links removed due to DMCA notice. Please see our extensive Klarman book notes below. New visitors, please check the Finance Trends home page for all new posts. Here's something for anyone who has been trying to get a look at Seth Klarman's now famous, and out of print, 1991 investment book, Margin of Safety .  My knowledge of value investing is pretty much limited to what I've read in Ben Graham's The Intelligent Investor (the book which originally popularized the investment concept of a "Margin of Safety"), so check out the wisdom from Seth Klarman and other investing greats in our related posts below. You can also go straight to Ronald Redfield's Margin of Safety book notes .    Related posts: 1. Seth Klarman interviews and Margin of Safety notes     2. Seth Klarman: Lessons from 2008 3. Investing Lessons from Sir John Templeton 4.

Slate profiles Victor Niederhoffer

Slate's recent profile of writer/speculator, Vic Niederhoffer has been getting some attention from traders and finance types in recent days. I thought we'd take a look at it here too, to offer up some possible educational value from Vic's experiences with trading and loss. Here's an excerpt from Slate's profile of Victor Niederhoffer : " I've enjoyed getting your e-mails. It sounds like you've thought a lot about being wrong. Well, the reason you contacted me, to call a spade a spade, is that I'm sort of infamous for having made a big, notorious, terrible error not once but twice in my market career. Let's talk about those errors. The first was your investment in the Thai baht, which pretty much wiped you out when the Thai stock market crashed in 1997. I made so many errors there it's pathetic. I made one of my favorite errors: "The mouse with one hole is quickly cornered." That is key. There are certain decisions you make in li

Clean Money - John Rubino: Book review

Clean Money by John Rubino 274 pages. Hoboken, New Jersey John Wiley & Sons. 2009. 1st Edition. The bouyant stock market environment of the past several years is gone, and the financial wreckage of 2008 is still sharp in our minds as a new year starts to unfold. Given the recent across-the-board-declines in global stock markets (and most asset classes) that have left many investors shell-shocked, you might wonder if there is any good reason to consider the merits of a hot new investment theme, such as clean energy. However, we shouldn't be too hasty to write off all future stock investments. After all, the market declines of 2008 may continue into 2009, but they may also leave interesting investment opportunities in their wake. Which brings us to the subject of this review. John Rubino, author and editor of GreenStockInvesting.com , recently released a new book on renewable energy and clean-tech investing entitled, Clean Money: Picking Winners in the Green Tech Boom . In Clean