Global Financial Data’s Market Tops and Bottoms Indicators for 2023

Global Financial Data’s

Market Tops and Bottoms Indicators for 2023

Bryan Taylor, Chief Economist


Global Financial Data tracks bull and bear markets in over 100 stock markets.  GFD has over 400 years of data to analyze when bull and bear markets have begun and ended and the number of market tops and bottoms that have occurred each year worldwide. GFD defines a bear market as a 20% decline in the primary market index for each country and a bull market as a 50% increase in the primary market index.  A market bottom occurs when the index declines by 20% or more after a 50% increase, and a market top occurs when the market rises by 50% or hits a new high after a 20% decline.  

Global Bulls and Bears

Bear markets occur more quickly than bull markets and over a shorter period of time with higher daily volatility, so their occurrence is quickly noted.  However, it may take several years for a market to make the 50% recovery that signifies a bull market, and it is only then that analysts realize that investors are benefiting from a new bull market.  Otherwise, a market might decline by 25%, rise by 30%, then decline again by another 25% producing one long bear market and not a series of bear markets. 

This is what made the 1929-1933 bear market crash in the US or the decline in Japan’s stock market between 1989 and 2012 so memorable. There was a decline, recovery, another decline, and another recovery for years.  Investors would expect that as the market bounced back the bear was gone, but the bear only reappeared and drove prices further down, ultimately declining by almost 90% in the US.  There were a significant number of bear markets in 2022, but are these bear markets over with, or will they continue into 2023?

The strength of the market bottom globally depends upon the number of markets that hit a bottom and begin to bounce back.  Global markets are integrated, and bear markets often occur across global markets simultaneously. This was seen in the Covid bear market of 2020. Global markets bottomed out within days of each other, started to rebound, and then made a historic rise!  Since bear markets usually last a year or two and bull markets last five to ten years, a significant number of bear market bottoms can provide comfort to worried investors that a new bull market has begun.

Figure 1 shows the number of market tops minus the number of market bottoms in each year since 1900. More market tops show the end of a bull market, and more market bottoms show the end of a bear market. The market tops in 1920, 1929, 1937, 1969, 1973, etc. are clearly visible, as are the market bottoms in 1921, 1932, 1940, 1974, 1982 etc.  There were fewer market tops and bottoms in the 1950s and 1960 as the bull market roared ahead.

Figure 1. GFD Total Market Tops Minus Market Bottoms, 1900 to 2022

The number of tops and bottoms expanded in the 1990s when many emerging and former communist countries opened stock markets increasing the number of global markets. After the market peaked in 2000, it took three years of bear market bottoms for global markets to start moving forward again.  The largest number of bull market peaks in history was in 2007, followed by the largest number of bear market bottoms; however, the number of market bottoms in 2020 when Covid struck exceeded the number of bear market bottoms in 2009. This shows that the degree of integration of global equity markets has increased over time.  When a global pandemic hit, the world’s global economies were all influenced by one another with great impact.  We are a global market today. Figure 2 shows GFD’s World Index’s market declines in 2000, 2008, 2020 and 2022.

Figure 2. GFD Indices Developed World Index, 1995-2022

Between 2009 and 2020, the U.S. Stock market rose dramatically while other global stock markets treaded water.  While U.S. Stocks, especially communication and information technology stocks, did well during the past decade, Emerging Markets and much of Europe failed to exceed their 2008 highs. This is reflected in the up and down uncertainty of market tops and bottoms.  There were three net tops in the world’s stock markets during the past decade in 2015, 2018 and 2021 and market bottoms in 2012, 2016 and 2020. 

The Covid Influence

When Covid struck, it led to the largest number of bear market bottoms in the past 100 years. Although some stock markets had hit their bull market peaks in 2018, most other markets topped out in early 2020.  In 2020, 84 stock markets suffered bear markets and hit their bottom, almost all in March 2020, before beginning a new bull market. The Covid bear market was both the most coordinated global bear market, and the shortest bear in history, lasting only two months in some countries. Figure 3 shows the 50% declines in 2000 and 2008 and the 25% declines in 2020 and 2022 in the GFD USA Top 100 Index.