Teun Draaisma, Morgan Stanley’s European strategist, has thoroughly researched the great bear markets of the past 100 years, coming up with a few learnings for modern-day investors. Be forewarned, though: Based on his findings about previous bear markets, Mr. Draaisma is now calling for a "super-bear scenario" in which "the current ‘bear market rally’ will come to a juddering halt and steep price falls will follow as real economic slowdown overcomes the underlying economy." In a column for the Financial Times, he shares his findings:
1. Valuations get very very low indeed;
2. Equities became cheap slowly;
3. Sentiment is not hugely negative at the bottom of the bear market;
4. Equities do trough during economic recessions, but they do not anticipate economic recovery by 6-9 months;
5. Times have changed, but most rules have not;
6. Don't fight the Fed;
7. There are some consistent early signs of economic improvement;
8. Fixed income markets have given some good warnings signals.
What do you think? Are we currently experiencing a bear market of the type predicted by Mr. Draaisma?
[image: Bear Enjoying Hot Tub]
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