You can't always trust statistics, but sometimes they can give you a glimpse of an idea of what is going on. Let's use a simple statistic to try to predict where the market might be heading if we are entering the Bear Market. Keep in mind that as for today we might be dealing just with the correction, I'm not saying we are in the Bare Market I'm just trying to speculate where the market might be heading if we are in one.
I analyzed all Bear Markets starting from 1956. Therefore the ones that happened in:1956 1961 1966 1968 1973 1980 1987 1990 2002 2007 2020. I calculated a simple statistical model of how long statistically it took for the market to come back to ATH after given Bear Market started and how much and how long the market used to fall. I marked three zones in the picture that represents the results.
The green one is the most optimistic one:
Fall of the market of up to 22% lasting less than 6 months
The yellow one is statistically most possible (~50%) if we assume a normal distribution model can be used for the prediction
Fall of the market between 22% to 45% lasting 6 to 22 months
The red one is statistically possible the same as the green one and this is a worst-case:
Fall of the market between 45% to 60% lasting 31 months
The white box presents statistically most possible place where the market is heading (both time and price)
Of course, you can't trust plain statistics, you need to monitor fundamental data and the overall economic situation, but this kind of model can always help to monitor how the current market compares with previous Bear Markets.
I analyzed all Bear Markets starting from 1956. Therefore the ones that happened in:1956 1961 1966 1968 1973 1980 1987 1990 2002 2007 2020. I calculated a simple statistical model of how long statistically it took for the market to come back to ATH after given Bear Market started and how much and how long the market used to fall. I marked three zones in the picture that represents the results.
The green one is the most optimistic one:
Fall of the market of up to 22% lasting less than 6 months
The yellow one is statistically most possible (~50%) if we assume a normal distribution model can be used for the prediction
Fall of the market between 22% to 45% lasting 6 to 22 months
The red one is statistically possible the same as the green one and this is a worst-case:
Fall of the market between 45% to 60% lasting 31 months
The white box presents statistically most possible place where the market is heading (both time and price)
Of course, you can't trust plain statistics, you need to monitor fundamental data and the overall economic situation, but this kind of model can always help to monitor how the current market compares with previous Bear Markets.