jeudi 12 mars 2015
SocGen Tries To Predict When The Next US Bear Market Starts
Posted on 21:51 by nice news
This is the longest bull market in US equity history dating back to 1945. The six year run-up in the S&P500 since March 2009 has been truly remarkable, having only been exceeded in price performance terms by the 1929 and 1999 bull markets. It is now also more than 800 days since we experienced even a 10% correction. While such strength and resilience is typically applauded, such exceptional markets rarely end well.
Andrew Lapthorne and the SocGen Quant Strategy team try to forecast its demise...
So we’re going to try predict the next US equity bear market, a foolish exercise that we admit is more likely to lay us open to ridicule (just ask the ECRI!). We’ll most probably be wrong, but the outcome is not the whole point of the exercise. Rather we hope to build a framework into which we can plug a whole range of macro and fundamental variables to work out their bear market relevance. We hope ultimately to use such a model to rank the importance of the ongoing data series and eventually to plug the resulting probability into some of our asset allocation models.
Based on six probit models developed in this report, we calculate the average (median) probability of having a bear market in Q2 2015 at about 18.4% (median = 17.5%). We find the key data series we should pay special attention are: term structure spread, senior loan officer surveys, the S&P 500 profit margin, and various style returns such as the return based on Piotroski scores.
Forecasting bear markets
What is the chance of the S&P 500 entering a bear market in 2015? Forecasting, as we all know, is something to be avoided, the future is always unknown. But providing a forecast is not the same as assessing potential risks, which is something we should be doing on an ongoing basis and knowing where we are today is a hard enough and worthwhile task in itself. We have already spent a great deal of time trying to assign a probability of the market
Andrew Lapthorne and the SocGen Quant Strategy team try to forecast its demise...
So we’re going to try predict the next US equity bear market, a foolish exercise that we admit is more likely to lay us open to ridicule (just ask the ECRI!). We’ll most probably be wrong, but the outcome is not the whole point of the exercise. Rather we hope to build a framework into which we can plug a whole range of macro and fundamental variables to work out their bear market relevance. We hope ultimately to use such a model to rank the importance of the ongoing data series and eventually to plug the resulting probability into some of our asset allocation models.
Based on six probit models developed in this report, we calculate the average (median) probability of having a bear market in Q2 2015 at about 18.4% (median = 17.5%). We find the key data series we should pay special attention are: term structure spread, senior loan officer surveys, the S&P 500 profit margin, and various style returns such as the return based on Piotroski scores.
Forecasting bear markets
What is the chance of the S&P 500 entering a bear market in 2015? Forecasting, as we all know, is something to be avoided, the future is always unknown. But providing a forecast is not the same as assessing potential risks, which is something we should be doing on an ongoing basis and knowing where we are today is a hard enough and worthwhile task in itself. We have already spent a great deal of time trying to assign a probability of the market
SocGen Tries To Predict When The Next US Bear Market Starts
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