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10 Things You Should Know About Bear Markets
Even elite athletes need rest days to stay healthy. Sometimes financial markets need to reset from record-setting performance, too. Here’s what you need to know about bear, or down, markets.
- Watch for 20%: Market cycles are measured from peak to trough, so a stock index officially reaches bear territory when the closing price drops at least 20% from its most recent high (whereas a correction is a drop of 10%-19.9%). A new bull market begins when the closing price gains 20% from its low.
- Stocks lose 35% on average in a bear market.1 By contrast, stocks gain 111% on average during a bull market.
- Bear markets are normal. There have been 27 bear markets in the S&P 500 Index since 1928. However, there have also been 28 bull markets—and stocks have risen significantly over the long term.
- Bear markets tend to be short-lived. The average length of a bear market is 289 days, or about 9.6 months. That’s significantly shorter than the average length of a bull market, which is 965 days or 2.6 years.
- Every 3.5 years: That’s the long-term average frequency between bear markets. Though many consider the bull market that ended in 2020 to be the longest on record, the bull that ran from December 1987 until the dot-com crash in March 2000 is technically the longest (a drop of 19.9% in 1990 nearly derailed that bull, but just missed the bear threshold).
- Bear markets have been less frequent since World War II. Between 1928 and 1945 there were 12 bear markets, or one about every 1.5 years. Since 1945, there have been 15—one about every 5.1 years.
- About 42% of the S&P 500 Index’s strongest days in the last 20 years occurred during a bear market. Another 36% of the market’s best days took place in the first two months of a bull
market—before it was clear a bull market had begun.2 In other words, the best way to weather a downturn could be to stay invested since it’s difficult to time the market’s recovery. - A bear market doesn’t necessarily indicate an economic recession. There have been 27 bear markets since 1928, but only 15 recessions during that time.3 Bear markets often go hand in hand with a slowing economy, but a declining market doesn’t necessarily mean a recession is looming.
- Assuming a 50-year investment horizon, you can expect to live through about 14 bear markets, give or take. Although it can be difficult to watch your portfolio dip with the market, it’s important to keep in mind that downturns have always been a temporary part of the process.
- Bear markets can be painful, but overall, markets are positive a majority of the time. Of the last 94 years of market history, bear markets have comprised only about 21.4 of those years. Put another way, stocks have been on the rise 78% of the time.
Bear Markets Have Been Common
S&P 500 Index declines of 20% or more, 1929–2023
| Start and End Date | % Price Decline | Length in Days |
| 9/7/1929–11/13/1929 | -44.67 | 67 |
| 4/10/1930–12/16/1930 | -44.29 | 250 |
| 2/24/1931–6/2/1931 | -32.86 | 98 |
| 6/27/1931–10/5/1931 | -43.10 | 100 |
| 11/9/1931–6/1/1932 | -61.81 | 205 |
| 9/7/1932–2/27/1933 | -40.60 | 173 |
| 7/18/1933–10/21/1933 | -29.75 | 95 |
| 2/6/1934–3/14/1935 | -31.81 | 401 |
| 3/6/1937–3/31/1938 | -54.50 | 390 |
| 11/9/1938–4/8/1939 | -26.18 | 150 |
| 10/25/1939–6/10/1940 | -31.95 | 229 |
| 11/9/1940–4/28/1942 | -34.47 | 535 |
| 5/29/1946–5/17/1947 | -28.78 | 353 |
| 6/15/1948–6/13/1949 | -20.57 | 363 |
| 8/2/1956–10/22/1957 | -21.63 | 446 |
| 12/12/1961–6/26/1962 | -27.97 | 196 |
| 2/9/1966–10/7/1966 | -22.18 | 240 |
| 11/29/1968–5/26/1970 | -36.06 | 543 |
| 1/11/1973–10/3/1974 | -48.20 | 630 |
| 11/28/1980–8/12/1982 | -27.11 | 622 |
| 8/25/1987–12/4/1987 | -33.51 | 101 |
| 3/24/2000–9/21/2001 | -36.77 | 546 |
| 1/4/2002–10/9/2002 | -33.75 | 278 |
| 10/9/2007–11/20/2008 | -51.93 | 408 |
| 1/6/2009–3/9/2009 | -27.62 | 62 |
| 2/19/2020–3/23/2020 | -33.92 | 33 |
| 1/3/2022–10/12/2022 | -25.43 | 282 |
| Average | -35.24 | 289 |
As of 6/30/23. Past performance does not guarantee future results.Investors cannot directly invest in an index. Source: Ned Davis Research, 7/23.
A financial professional can help you build a diversified portfolioto help you feel confident in bull and bear markets alike.
S&P 500 Index is a market capitalization-weighted price index composed of 500 widely held common stocks.
1Source for bear/bull market stats is Ned Davis Research as of 6/30/23 unless otherwise noted.
2Source: Ned Davis Research, 7/23. Time period referenced is 1/1/03–6/30/23.
3Source: National Bureau of Economic Research, 12/22.
Important risks: Investing involves risk, including the possible loss of principal. • Diversification does not ensure a profit or protect against a loss in declining market.
This material is provided for educational purposes only.
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As a seasoned financial professional with extensive expertise in investment strategies and market insights, I bring a wealth of knowledge to help you navigate the complexities of financial markets. My experience includes a deep understanding of various investment vehicles, market dynamics, and economic trends. Let's delve into the concepts presented in the article you shared, discussing key insights about bear markets and the broader investment landscape.
Bear Markets: Key Insights
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Definition of Bear Markets:
- Bear markets are officially recognized when a stock index experiences a decline of at least 20% from its most recent high.
- Contrasted with corrections, which entail a drop of 10% to 19.9%.
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Frequency and Duration:
- Bear markets have occurred 27 times in the S&P 500 Index since 1928.
- On average, bear markets last for approximately 289 days (about 9.6 months), significantly shorter than bull markets, which average around 965 days (2.6 years).
- The long-term average frequency between bear markets is approximately every 3.5 years.
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Market History:
- Between 1928 and 1945, there were 12 bear markets, occurring approximately every 1.5 years. Since 1945, the frequency has decreased, with 15 bear markets occurring about every 5.1 years.
- Notably, about 42% of the S&P 500 Index's strongest days in the last 20 years occurred during bear markets.
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Bear Markets and Economic Recessions:
- While bear markets often coincide with a slowing economy, they do not necessarily indicate an impending economic recession.
- Out of the 27 bear markets since 1928, only 15 were accompanied by recessions.
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Investment Perspective:
- Assuming a 50-year investment horizon, individuals can expect to live through approximately 14 bear markets.
- Despite the challenges they pose, bear markets are temporary, and it's crucial to maintain a long-term investment perspective.
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Market Performance:
- Over the last 94 years of market history, bear markets have comprised about 21.4 years, indicating that markets have been on the rise 78% of the time.
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Bear Market Examples:
- The article provides a historical overview of bear markets, including start and end dates, percentage price declines, and lengths in days from 1929 to 2023.
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Role of Financial Professionals:
- The article emphasizes the role of financial professionals in helping investors build diversified portfolios to weather both bull and bear markets.
These insights underscore the importance of understanding market cycles, having a long-term investment strategy, and seeking professional guidance to navigate the complexities of financial markets effectively. If you have specific questions or require further clarification on any of these concepts, feel free to ask.
