When will the bear market finally end?

We are currently in a bear market phase, which is essentially the opposite of a bull market. The market enters this phase if it falls 20% or more from its 52-week high. Today we see this pessimism from investors who are waiting to see when the turn for the better will finally come. However, this may not happen so soon and there is a risk of further deepening negative sentiment. [1]  

A bear market on all fronts

The last significant market declines before the onset of military conflict date back to 2020, when the coronavirus pandemic began and was followed by restrictions around the world. In the US stock market, bear markets typically last about 9 months. This means that investors' desperation could soon come to an end, but things could be different. [2] The continuation of the military conflict is deepening the economic crisis, inflation is rising and uncertainty in the markets is growing. The global economic environment has begun to be a drag on almost all investments such as equities, futures, foreign currencies and cryptocurrencies. The negative sentiment has spilled over into almost all asset classes and it is hard to say when this will stabilize. Some analysts predict that the bear market could last for the next two years. The benchmark S&P 500 index, as a sort of proxy for overall market performance, first fell into a bear market phase on June 13, when it closed down 21.8% from its January 3 high.*

The performance of the US benchmark S&P 500 index over the past 5 years. (Source: Investing)

Negative outlook

According to Goldman Sachs, downside risk in the US could rise to as much as 30% over the next year. The Bloomberg Economics model predicts an even sharper decline over the same period, of up to 38%.[3]

However, many Americans and Europeans believe and feel that a recession is already here. A CivicScience poll found that more than a third of Americans believe that the economy is in recession right now.

Escaping the bear market

The problem is that no one can say for sure when the bear market will end. Despite the downturn appearing across the board in all assets, even cryptocurrencies which were supposed to be resilient to global changes, investors in the commodities sector may have found some type of salvation. Energy and commodities are and have been one of the areas that have been rising, with WTI crude oil hitting a 10-year high this year.* However, we need to be wary of the downturn. Actions by central banks such as the Fed and others around the world are raising rates in an attempt to stem rapidly rising inflation, and commodity markets may suffer or slow on fears of recession and softening demand. Another asset that is benefiting from the Fed's more aggressive policy is the U.S. dollar. This currency is currently a safe haven for investors and we expect the dollar to remain buoyant thanks to tight monetary policy in the US. [4]

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* Past performance is no guarantee of future results.

[1,2,3,4] Forward-looking statements are based on assumptions and current expectations, which may be inaccurate, or based on the current economic environment which is subject to change. Such statements are not guaranteeing of future performance. They involve risks and other uncertainties which are difficult to predict. Results could differ materially from those expressed or implied in any forward-looking statements.