
The Bare Necessities: A taxonomy of S&P 500 bear markets
Luca Tobagi. Investment Strategist
Bears are beautiful to look at from a distance. However, sometimes they move closer to us and can be scary. This is why it is important to know their habits and characteristics.
Bears can inspire an instinctive sympathy; sometimes they can even look tender. Who doesn’t remember with a smile the funny and clumsy Baloo that, in Disney’s movie “The Jungle Book,” sings to Mowgli the song “The Bare Necessities,” which sums up his philosophy of life? But bears are nice as long as you see them from afar — up close, they are big, they can get ferocious, and their growl can intimidate. They can be especially scary for investors — the bear evokes sharp declines in stock markets, sometimes associated with other unpleasant situations, such as recessions.
It is good that the bear, in equity markets as in nature, is a rather reserved animal. It doesn’t get out often and does not like to be seen around. Sometimes, however, a bear comes out into the open, not always preceded by clear signs of his intentions. Whoever is near the bear will likely try to escape far and quickly. If the encounter was a surprise, the escape is often hasty and messy.
A situation like this has been happening recently in financial markets, equities in particular. There had been some rustling of leaves, some dried twigs crushed by a timidly moving bear’s paws. But the global explosion of the COVID-19 pandemic has made the bear angry, and now the world is divided between those who ran away in a disorderly way to escape the bear’s wrath and those who instead lie in a sheltered corner, waiting for a good opportunity to regain possession of the forest.
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Important information
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Data as at 31.03.2020, unless otherwise stated. This document is marketing material and is not intended as a recommendation to invest in any particular asset class, security or strategy. Regulatory requirements that require impartiality of investment/investment strategy recommendations are therefore not applicable nor are any prohibitions to trade before publication. The information provided is for illustrative purposes only, it should not be relied upon as recommendations to buy or sell securities.
Where individuals or the business have expressed opinions, they are based on current market conditions, they may differ from those of other investment professionals, they are subject to change without notice and are not to be construed as investment advice.