Finding a Bottom in Equities

DoubleLine

Research

9 Pages

DoubleLine Capital explains how bear market drawdowns relate to starting valuations and recession length when searching for an equity bottom. Since 1945, 13 bear markets saw a 29.6% median drop, and 2022 was down 23.6% as of June 16. Their simple model suggests even an eight month recession could still mean roughly a 44% decline.

Date published: June 2022

Key Takeaways

Bottoming is conditional: Market lows depend on valuation, earnings risk, and recession path, not a single sentiment indicator
Beware hidden beta: Many “defensive” exposures can still behave like equities when growth expectations deteriorate quickly.
Look for capitulation: Durable bottoms often require forced selling, tight financial conditions, and a clear shift in risk appetite.
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