It has become a familiar refrain. A City pro is asked to comment about current stock market conditions. He confidently tells the audience that the recent bout of stormy weather is just a temporary situation because is there is "no obvious trigger" for a more serious bear market.
No Trigger fans are aware of many of the same negative forces affecting the UK stock market that the rest of us see. On the international stage, problems include Middle East political woes, oil, Iraq, Iran and the like. Closer to home, inflation fears and rising interest rates are worrying. America must contend with a sub-prime lending crisis, falling real estate prices and rising inflation.
However, No Trigger fans believe investors have been exposed to these problems for some time and current prices reflect these problems. In other words, they believe the bad news is already in the price. Even better, there is no sign of any fresh event that has the potential to trigger a new bear market.
It is a comforting theory. Unfortunately, a quick scan through historical UK stock market records finds no support for it.
History teaches that investors rarely spot a sharp downturn near its beginning.
There were five big drops in the last three decades that pulled the average share price down by more than 20 per cent. Four of the five were unforeseen by the experts. No warnings were issued near the beginning of these declines by any of the mainstream commentators.
The single exception to the rule occurred in 1990. Recall that inflation began to rise rapidly in 1989. Chancellor Nigel Lawson sharply raised interest rates. The housing market began to collapse, eventually throwing millions of new home owners into a negative equity trap. Some commentators warned us in advance that an equity downturn was on the cards. Shares fell 22 per cent. It was the only bear market in recent times when investors were pre-warned by the experts.
The other four bear markets that occurred in modern times caught investors (and commentators) completely by surprise.
The first of the group suddenly began in August 1981. Paul Volker, Alan Greenspan's predecessor at the Federal Reserve, observed that a long-term bout of double digit inflation was sapping the vitality of the US economy. He raised interest rates and announced he would continue to raise them until the inflation bubble burst once and for all.
Shares fell 21 per cent in just five weeks. No commentator warned investors near the beginning of the drop that a steep downturn would follow Mr. Volker's surprise announcement.
The next big drop occurred in 1987. The world's financial markets went into free-fall and the FTSE-100 lost more than one-third of its value in a few months. As we now know, investors suddenly took fright from a potent combination of over-valued shares, global trade imbalances, inflation, and currency imbalances.
These were not surprise events. The economic problems were talked about for months. The real surprise is that investors suddenly chose to react in July 1987. Once again, no forecaster warned investors before July's peak (or even in the month that followed) that the six-year bull market was over.
The 1990s was generally good to investors. There were some dips of course but the first big decline of the decade occurred in the third quarter of 1998. Investors were slammed by a 25 per cent drop which ended after just three months. We again learned, after the fact, that a combination of Russia's bond default, the Long-Term Capital Management hedge fund collapse and Asian capital outflows had serious consequences. But how many commentators told us to back away from shares in July 1998, near the beginning of the drop, as the bad news began to emerge. The answer is none.
The most recent big decline was the 52 per cent drop in 2000-03. Everyone knew, after the fact, the tech bubble had burst. But no forecaster told investors at the beginning of 2000 to step away from shares because a painful bear market was on the horizon.
The objective evidence is quite clear. Investors rarely are able to spot emerging bear markets, or even belatedly recognise one has started, near its beginning. It is something to think about the next time a commentator claims there is no sign of an approaching bear market.