FTSE All-Share index enters the eleventh bear market in its history

“It has taken just 52 calendar days for the FTSE All-Share to fall from January’s post-election high into bear market territory, to give further life to the old saying that ‘markets ride the escalator up and the elevator down,’” says Russ Mould, AJ Bell Investment Director. “This is the All-Share index’s eleventh bear market since its launch in 1962 and the good news is they tend to be short, even if they are undeniably brutish and nasty.

“The average bear market in the UK’s FTSE All-Share index has been just over one year and the average drop has been 36% (excluding the current one).

By contrast, nine bull markets (excluding current one) offered an average capital gain of 142% over an average of nearly 1,500 days.

Source: Refinitiv data

Source: Refinitiv data

“This may offer a little comfort to investors who are likely to be shell-shocked, especially as it has taken such a short period of time for confidence in the market to collapse, with this being the second-quickest plunge into bear territory on record, with this time’s 52-day span comparing to a 42-day slide in 1981.

“Contrarian investors may even look to draw comfort from the speed of the fall, especially as the 1981 bear market swiftly gave way to the raging bull run that began in autumn 1981 and only ended with the Black Monday Crash of 1987 (and even that turned out to be a temporary, if very nasty, speed bump in an advance that ran all the way through to 1998 and then ultimately 2000).

“Would-be bargain hunters will also draw inspiration from Jim Rogers, who once noted: ‘Nearly every time I have strayed from the herd I have made a lot of money. Wandering away from the action is the way to find the new action.’

“In this case, straying away from the action could be interpreted as looking for stocks to buy, especially as the collapse in the ten-year Gilt yield to just 0.13% and likely interest rate cuts will leave investors earning precious little on two major asset classes.

“One thing which might just keep investors in check and stop them from piling in straight away is the knowledge that markets do fall hard and fast when bears are in charge. As buyers and optimists panic and throw in the towel, an average bear market has suffered two-thirds of the total peak-to-trough decline in the final one-third of their duration, over the prior ten episodes since 1962.

Source: Refinitiv data