Citi's Bear Market Checklist

In a new report, Citi analyst Robert Buckland runs through the firm’s Global Bear Market Checklist to look for warning signs that the recent drop in global equity prices is an indication of the beginning of a bear market. Although there are several more “worrying” signs on the checklist than there were this time last year, there are much fewer negative indicators than there were prior to the bear markets that began in March 2000 and October 2007.

Growth concerns
The prevailing fears when it comes to the potential dawning of a new bear market seem to be concerns over growth emerging markets, particularly China. In addition, commodity weakness and policy uncertainty also appear to be worrying global investors.

The checklist
Citi’s Bear Market Checklist looks at 16 different indicators to determine the likelihood of a bear market. In the new report, the firm included the current indicators, the indicators from one year ago, and the indicators prior to the beginning of the bear markets in 2000 and 2007.


Three of the sixteen indicators (Net Debt/EBITDA, M&A and US HY Bond Spread) are currently in the “worrying” zone. This trend is troubling since none of the sixteen indicators were in this zone this time last year. However, three out of sixteen is a far cry from the fifteen and twelve worrying indicators that were seen prior to the 2000 and 2007 bear markets, respectively.

“This suggests that a sustained bear market is still unlikely but we will continue to watch these variables closely,” Buckland concludes.

Maturing bull
Instead of a bear market, Citi suggests that the world is now experiencing an aging bull. Traders should expect high M&A levels and high volatility in equity markets to continue.