Uncertainty because of COVID-19 is the most important cause of the current free-fall and there is a possibility of another correction of anywhere between 20 to 30% from current levels.
What we are now witnessing is the 7th bearish phase in the last two decades and analysis of this period reveals that
Average bear period was 308 days. Currently we are only on 76th day.
Average correction was 35%. Current correction has already crossed 30%, which is also the steepest in the shortest period.
Post correction average returns were 43% in 1 year which escalated to beyond 100% over 3 years.
Below table lists the vitals of the six bearish phases beginning the year 2000:
Correction of 31.05% is as of March 18th 2020
The moot questions remain
How long will the bears rule?
How much more can the markets fall?
According to our understanding of the situation, seems like it’s an easy 10 more months before we see a strong bull phase showing up.
Fresh investments at current levels holds a fantastic opportunity to more than double in 3 years from now. Investments for less than two year horizon should strictly be avoided. Now also is a chance to churn your portfolio as the good, bad and ugly have all fallen.