Historically investors who buy into the stock market at or around its lowest point profit the most when the market bounces back. But how does one know when the market is hitting bottom?

A quarterly market briefing held by Bermuda Investment Advisory Services Ltd. (BIAS) last week couldn't tell investors exactly when the current market would bottom out but it did take a historical look at `lessons from past bear markets' and how those lessons could be applied in the current market.

BIAS chief investment officer Robert Pires said: "The crux of the issue is that there are no bells and whistles, big bang or fireworks to indicate the end of the bear market." Indeed he said the end of the bear market - which is the opposite of a bull market and a prolonged period of falling prices (usually by 20 percent or more), marked by investor pessimism - would not be apparent until it was studied some months or even years into the future.

But this isn't stopping the investment professionals at BIAS from watching closely for indicators that we may be near the end of the bear market: "We've done our best to see what may indicate the end of the market," Mr. Pires said. To this end, the company, as in past investment sessions, looked at the ways the market behaved during past crises as a means to help predict how the market could act during the current situation.

Mr. Pires said that past scenarios had shown there were often three indicators that market conditions may be changing: low volume of trading which may provide an indication that the `bear is tiring', two months of oversold markets - when share prices have dropped more than they should against fundamental factors - providing a solid base for stock market recovery and thirdly, buyers will return to the market once valuations return to their historical average.

Mr. Pires said all but the third indicator had been seen in the current market, which could signal that the bear market may be near an end: "All of our criteria have been met with the exception of valuation," he said and added that BIAS was looking for price/earnings (P/E) ratio of 15 times. As of November 3, the 2002 estimated P/E ratio stood at 18.2 times.

But Mr. Pires cautioned that there were elements in the current market that needed to be taken into consideration. Firstly there was the lack of trust in corporate leaders and lack of trust in the corporate system, after a wave of corporate scandals including WorldCom and Enron. Secondly Mr. Pires said there was the possibility of war, or the uncertainty of the resolution of the Iraq conflict, to be taken into consideration.

Mr. Pires said putting things into that context made it difficult to determine exactly what would happen. As evidence of that, Mr. Pires said in order for P/E ratios to come down earnings would either have to jump or the markets would have to come down. "This is the one element that so far, has not fallen into place," but he said further that he did not see earnings going up in the near term, or until the Iraq conflict was resolved as companies were waiting to see what happened before investing in their businesses. Despite these uncertainties, Mr. Pires said it is a time to be looking at one's investment strategy: "On the evidence before us, we do not see a recovery before the fourth quarter of 2002. However, we are in an oversold market and long-term historical evidence indicates that stocks held through successive bear market lows provide higher returns than bonds or cash."

And taking into account the current low interest rate environment, Mr. Pires said it was a good time to carefully consider stock market investments as there were good investments to be made especially taking into consideration the low level of returns from some other types of investments. Mr. Pires concluded that it looked like the end of the bear market was close but that in the context of the uncertainty of the Iraq situation, it would be difficult to determine for certain what will happen. "We may be in for a near-term slide but there are certainly still stocks worth buying," he said.