Events that Indicate a Market Bottom in a Bear Market

Compiled by: Lord William

Under Trump's extreme trade policies, the Russell and Nasdaq entered bear markets one after the other;

I have summarized the reasons, declines, and turning points of bear markets in the U.S. stock market over the past 50 years (a drop of more than 20% from the peak).

1973-1974 Bear Market

Time: January 1973 – October 1974

Decline: Approximately -48% (S&P 500)

Reasons:

Oil crisis (First oil crisis, OPEC embargo in 1973)

High inflation + stagflation

Federal Reserve tightening monetary policy

Nixon administration scandal ("Watergate")

Turning Point:

Stabilization of oil prices, Federal Reserve easing monetary policy, Ford's presidency

1980-1982 Bear Market

Time: November 1980 – August 1982

Decline: Approximately -27%

Reasons:

Chairman Paul Volcker's aggressive interest rate hikes to curb inflation, federal funds rate rising to 20%

Deep recession

High unemployment and declining corporate profits

Turning Point:

Federal Reserve begins to cut interest rates, inflation peaks (August 1982)

1987 "Black Monday"

Time: August 1987 – December 1987

Decline: Approximately -34% (S&P 500)

Reasons:

Technical sell-off triggered by automated program trading (portfolio insurance)

Rising interest rates and trade deficit concerns

Dollar fluctuations linked to global markets

Turning Point:

Federal Reserve quickly injects liquidity, intervenes in the market again

1990 Recession Bear Market

Time: July 1990 – October 1990

Decline: Approximately -20%

Reasons:

First Gulf War triggers a surge in oil prices

U.S. enters a mild recession

Commercial real estate crisis + bank credit tightening

Turning Point:

Market expectations turn optimistic after the outbreak of the Gulf War (quick victory)

2000-2002 Tech Bubble Burst

Time: March 2000 – October 2002

Decline: Approximately -49% (S&P 500), Nasdaq over -78%

Reasons:

Bursting of the internet tech stock valuation bubble

September 11, 2001 terrorist attacks create uncertainty

Declining corporate profits, confidence crisis

Turning Point:

Completion of Nasdaq valuation reset, Federal Reserve continues to cut interest rates

2007-2009 Global Financial Crisis

Time: October 2007 – March 2009

Decline: Approximately -57% (S&P 500)

Reasons:

Bursting of the real estate bubble

Subprime mortgage crisis → Lehman Brothers bankruptcy

Global credit freeze, banking crisis, Federal Reserve forced to intervene

Turning Point:

Launch of QE1 by the Federal Reserve in March 2009 + fiscal stimulus

2018 Bear Market

Time: October 2018 – December 2018 (Trump's first term)

Decline: Approximately -34%

Reasons:

Trump escalates the U.S.-China trade war, Federal Reserve raises interest rates four times that year, conflict between the White House and the Federal Reserve

Turning Point:

Federal Reserve shifts to a dovish stance in January 2019, pauses interest rate hikes and signals more flexible policies

2020 Pandemic Bear Market

Time: February 2020 – March 2020 (the fastest bear market in history)

Decline: Approximately -34%

Reasons:

COVID-19 pandemic triggers global economic lockdowns

Supply chain disruptions + business shutdowns

Panic selling + initial policy lag

Turning Point:

Unlimited QE by the Federal Reserve on March 23, 2020 + introduction of fiscal relief legislation

2022 Rate Hike Bear Market

Time: January 2022 – October 2022

Decline: Approximately -27% (S&P)

Reasons:

High inflation (CPI as high as 9.1%)

Federal Reserve significantly raises interest rates (benchmark rate rises from 0 to over 4.5%)

Compression of tech stock valuations, soaring bond yields

Turning Point:

CPI declines in October, Federal Reserve signals a slowdown in rate hikes (Q4 2022), Silicon Valley Bank collapses

Summary

1. This bear market shares similarities with the two bear markets during Trump's term, both being rapid declines, and both previous bear markets ended with a V-shaped recovery;

2. Events are needed to signal a market bottom in a bear market.

Response

1. Do not use leverage during left-side declines;

2. Ensure that you will not be liquidated even if the S&P drops 57% (a further 40% drop from the current level);

3. Do not get overly excited on the left side, buy in batches, only buy index funds;

4. Prepare available funds for right-side accumulation;

5. Right-side buying requires patience to wait for turning point "events" and technical patterns.

Important "Events" or "Signals"

1. Possibility of Trump delaying the implementation of additional reciprocal tariffs—30% probability within the next week;

2. The EU's formal response to reciprocal tariffs—50% probability of following the UK and Southeast Asia's compromise within the next week;

3. Further escalation or easing of U.S.-China tariffs—between April 7 and 15, Trump is keen on TikTok, discussions should occur;

4. Buffett's market timing—signals should emerge at the Omaha shareholder meeting on May 3;

5. The Federal Reserve's market intervention stance—unlikely in the short term, but if conditions continue to worsen, there may be possibilities in May to June;

If negative "events" occur, continue to wait; if positive "events" occur, you can increase your position!

Finally,

The foundation of U.S. technology, military, and dollar hegemony cannot be squandered in four years of Trump,

A major bear market breeds great opportunities; first survive, then patiently wait for a full strike!

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