Recession often gives way to long bull runs

MUMBAI: If you have lost a fortune in shares, the best way to make it up perhaps is to buy some more. Since the great depression of 1929, the world has seen 12 major bearish phases. A typical bear market has lasted for about 22 months and seen an average fall of 51%. However, the average gains during the bull market between any two downturns have been an eye-popping 186%. The index here in question is the S&P 500.

Bull markets ��� after every recessionary phase ��� have always been good for investors. All major bull rallies since end-1930 have resulted in market gains of 50-500%. Historic numbers show that the magnitude (size or breadth) of a bull market is greater than a bear market. The million dollar question is: are we at the threshold of another bull market rally?

���Markets could go up intermittently, but convincing rallies will take time. The current bear phase is different from what we���ve experienced in the past. There are so many negative factors plaguing various economies. Only a rise in global demand and depreciating dollar could do some good for the economy and market,��� said ICICI Private Banking global research head G Ramachandran.

As per Bloomberg data, if one looks at the period between 1929 and 1953, bear markets stretched for about 33 months and eroded the S&P 500 index by over 86%; while the intermittent bull rallies spanning about 268 months logged returns of over 627%. Likewise in 1698 ��� during the days of Penn Central Railroad Bankruptcy ��� the bear phase lasted for 11 months and eroded the index by more than 36%. This was followed by solid gains of about 57% over 22 months.

In 1973 ��� during the Arab Oil Embargo and Watergate scandal ��� the market shed about 48% in a span of 21 months; it, however, recovered thereafter and registered rip-roaring gains of 95% in 70 months. The dotcom bust in early-2000 saw the market losing about 50%; the ensuing bull phase saw the S&P index rising over 97% from its lows. Experts say there is greater external support for a recovery this time around.

���Stimulus packages and concerted global action to set ailing economies right have never before happened in times of global recession and subsequent bear market phases. The packages and the combined reconstruction efforts of all economies ��� both fiscal and monetary ��� should help the market recover even faster,��� said Birla Sunlife MF CIO A Balasubramaniam.

���It may take time for the economy to recover. Though we may see some negative momentum, the markets could look better from hereon. Analysts expect emerging market inflows to gather steam, after the G-20 meet,��� he added.

A recent UBS report predicted the Sensex at 13,500 a year from now, in March. If one reads historical bear market trends, a year-on-year rise of 65% from lower levels is not impossible.