The U.S. stock market may be in a bear phase, if so, how long might it last? How low might it go? (not far from here) What kind of recovery may be expected? (big double digit growth)

Bull phases last longer than bear phases. The last two bull phases gained over 100% over an average of 1307 days.  The last two bear phases (2001 and 2009) lost an average of 46% over 396 days.  They followed “bubble” periods in tech stocks and housing and where “cash was trash”– this is not the case today – the only “bubble” today is in bonds and cash is being hoarded in unprecedented amounts.  The bear phases were also occasioned by above average P/E multiples whereas today’s P/E multiple is significantly below average.  So far, the current market is down ~14% over the last 99 days.  It may not turn into a full-fledged bear market – which is my bet and why I refer to this as a “bear phase”.  A “bear market” is thought to be when the market is down 20%.  We aren’t down 20% but we have sentiment indicators that are near or equal the levels last reached at the bottoms of bear markets.  Bear phases are obviously followed by bull phases.  Once a recovery is considered underway, history suggests that the following 12 months will experience market growth of as much as 3X better than the average market growth of 8% since 1929.  Of course, things may be different this time around –eh?  The following chart contrasts the duration and percentage move of bull and bear markets since 1926.   Jeb Terry, Sr. Sept 26, 2011

Aberdeen Investment Management – a guide service for micro-cap technology investment

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