A Silver Lining In Bear Markets

Wealth destruction and bear markets are considered to be synonymous. However, historical evidence suggests that bear markets do provide lucrative opportunities to those who show conviction in equities. Geyatee Deshpande explains how the bounce-backs are sharper in bear markets, thus offering ample investing opportunities for investors

- Geyatee Deshpande

As of now, equity investors are faced with a precarious market situation where on one hand the opportunity seems to be too good to resist with some of the world’s foremost authorities in the investing world calling this a “once in a decade” investment opportunity and on the other hand the current crisis keeps on deepening with no signs of stability in sight. It is that phase of the markets where one can easily defend both – the most optimistic of the lot as well as the most pessimist of the lot – since anything can happen from here on.

That is to say we may come out of this global crisis swiftly without any permanent damage to global economies or the crisis may persist longer than we all think and thereby lead to some heavy permanent damage to the global economy. If there is no permanent damage to the economies, chances are that the recovery post the crisis will be a classic V-shaped structure and with that assumption the equity markets do look extremely attractive at the current levels. It’s an excellent level to enter the markets and indeed an opportunity that may not be repeated again.

On the other hand, if the crisis persists for a longer than expected time frame and there is permanent damage to the supply capabilities of economies – which is unlikely – the bottom for equity markets could be much lower from the current levels. Each economy is unique and so is the way in which any economy recovers post a crisis. However, the current crisis is more global than most of the previous crises we have seen in the last 100 odd years. Global recovery this time around is quintessential.