Important information

The information contained in this website is intended strictly for sophisticated institutions.

The information contained in this website, does not constitute and should not be construed as an offer of, invitation or proposal to make an offer for, recommendation to apply for or an opinion or guidance on a financial product, service and/or strategy. Whilst great care has been taken to ensure  that  the  information  contained  in  this  website is  accurate,  no  responsibility  can  be accepted for any errors, mistakes or omissions or for any action taken in reliance thereon. You may only reproduce, circulate and use this website (or any part of it) with the consent of Capital International Management Company Sàrl (“CIMC”), 37A avenue J.F. Kennedy, L-1855 Luxembourg.

The information contained in this website is for information purposes only. It is not intended for and should not be distributed to, or relied upon by, members of the public.

The information contained in this website, may contain statements that are not purely historical in nature but are “forward-looking statements”. These include, amongst other things, projections, forecasts  or  estimates  of  income.  These  forward-looking  statements  are  based  upon  certain assumptions, some of which are described in other relevant documents or materials. If you do not understand the contents of this website, you should consult an authorised financial adviser.

Capital IdeasTM

Investment insights from Capital Group

Categories
Long-Term Investing
Rob Lovelace shares his view on the current bear market
Rob Lovelace
Equity portfolio manager
February 3, 2023

Over long periods of time, there are two different types of bear market, those that are associated with a recession and those that are not, and the former are much rarer. When recessionary bear markets do happen, they tend to be about twice as long and go much deeper than those not associated with a recession.


If you map the course of these recessionary bear markets, they're incredibly similar in both their duration and form and seem to match well with what's going on in the markets right now. The good news is that there are no systemically broad market risks with this bear market, compared to the risks posed by collateralised mortgage vehicles during the GFC (the last time we had a bear market associated with a recession). I believe we will come out the other side of this bear market stronger and better for it having cleared up those excesses in the global economy.


Looking forward: who will lead us out of the bear market?


A key message from the last few bear markets is the sectors that led into the bull market were almost never the ones that led us out. If we consider the FAANGs, which had been particularly strong, will they be the ones to lead us out of the market?


I don’t necessarily think they are going to be the worst sector, but it's very rare that the big leaders going in are the strongest coming out. So where should we be looking for that for that next leadership group? 


Market leaders before and after bear markets are rarely the same

D7_market-leaders-before-and-after-bear-markets_752x397px(en)

Past results are not a guaranteed of future results.

Annualised returns shown are in the three years prior to and after the bear market period shown. Based on MSCI World index in US$ terms with net dividends reinvested.

Sources: Capital Group, MSCI

In this article, vice chair and president of Capital Group Rob Lovelace compares today’s bear market with those in the past and explores which companies could be the next equity market leaders.


 


Risk factors you should consider before investing:

  • This material is not intended to provide investment advice or be considered a personal recommendation.
  • The value of investments and income from them can go down as well as up and you may lose some or all of your initial investment.
  • Past results are not a guide to future results.
  •  If the currency in which you invest strengthens against the currency in which the underlying investments of the fund are made, the value of your investment will decrease. Currency hedging seeks to limit this, but there is no guarantee that hedging will be totally successful. 
  • Depending on the strategy, risks may be associated with investing in fixed income derivatives, emerging markets and/or high-yield securities; emerging markets are volatile and may suffer from liquidity problems.

Rob Lovelace is an equity portfolio manager and chair of Capital International, Inc. He has 38 years of investment industry experience (as of 12/31/2023). He holds a bachelor’s degree in mineral economics from Princeton University. He also holds the Chartered Financial Analyst® designation.

Learn more about
Long-Term Investing
Market Volatility
Equity
Active Management
Download PDF

Our latest insights

RELATED INSIGHTS

Past results are not predictive of results in future periods. It is not possible to invest directly in an index, which is unmanaged. The value of investments and income from them can go down as well as up and you may lose some or all of your initial investment. This information is not intended to provide investment, tax or other advice, or to be a solicitation to buy or sell any securities.

Statements attributed to an individual represent the opinions of that individual as of the date published and do not necessarily reflect the opinions of Capital Group or its affiliates. All information is as at the date indicated unless otherwise stated. Some information may have been obtained from third parties, and as such the reliability of that information is not guaranteed.

Capital Group manages equity assets through three investment groups. These groups make investment and proxy voting decisions independently. Fixed income investment professionals provide fixed income research and investment management across the Capital organization; however, for securities with equity characteristics, they act solely on behalf of one of the three equity investment groups.