Shane Oliver Head Economist at AMP discusses what drives mild versus deep bear markets.
- Historically, bear markets in Australian shares have seen an average fall of 33% over 18 months.
- However, this masks a huge range. 65% of bear markets have seen gains over the 12 months following an initial 20% decline in share prices.
- Factors involved in whether bear markets are mild or deep include whether there is a recession, whether earnings slump and whether the market was overvalued or not prior to the start of the bear market.
- Our view remains that a recession is unlikely, that earnings growth will be soft but is not about to implode and valuations are not stretched.
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