Based on 43 large sell-offs in the world's major equity markets, Morgan Stanley gauges how the current market slide compares to bear markets and bull corrections through history. While they have tended to last about 190 business days, with drawdowns around 30%, the current environment is considerably weaker than the typical bear market beginning...
The Bear Necessities – What’s the ‘Typical’ Sell-Off Environment?
Valuations tended to be cheaper than those seen at current sell-off’s peak, while macro (GDP, inflation) tended to be stronger at the start of bear markets.
If ACWI followed the script precisely, it would imply ~10% downside from current levels over the course of four weeks.
Equity markets started the current sell-off from a more expensive point on most valuation metrics and remain more expensive vs. previous troughs.
The weaker macro vs. previous market sell-offs argues for being defensive and avoid stretching for beta. Overall, we prefer credit over equities, as it is almost priced for a recession.
Full Bear Market Almanac below: