Stocks on both sides of the Atlantic are falling as investors worry about the risk of global recession, the Russia-Ukraine war, high inflation, recognition of the need for energy reliability and rising interest rates. The world economy has not grown slower for more than 20 years, if we disregard 2009 and 2020, when the world economy shrank because of the financial crisis and the covid-19 crisis respectively.
Deepest, most prolonged declines, averaging around -60% over the course of three years and taking up to a decade to fully recover. What distinguishes a structural bear market from a cyclical one is the presence of meaningful financial imbalances, which we do not see as a risk today.
Tend to fall about -30% at their maximum drawdown and last an average of two years, taking about five years to fully recover. These tend to be associated with the economic cycle and monetary policy tightening.
The shortest in duration and are typically triggered by an exogenous shock, such as the onset of the COVID-19 pandemic. An average decline for event-driven bear markets is about -30%, and we typically do not see a prolonged recession as a result.
Covid-19, inflation, interest rate hikes and Russia’s invasion of Ukraine has given new impetus to Europe’s ambition of achieving “strategic sovereignty,”
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