How long do bear markets last?
The duration of bear markets can vary, but on average, they last approximately 289 days, equivalent to around nine and a half months. It's important to note that there's no way to predict the timing of a bear market with complete certainty, and history shows that the average bear market length can vary significantly.
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.
The current rebound from the bear market low in October 2022 is now just eight months old, suggesting an additional 10% gain could potentially take almost another year to achieve. As shown above, recovery times vary widely and depend on the economic environment.
Bear markets are defined as sustained periods of downward trending stock prices, often triggered by a 20% decline from near-term highs. Bear markets are often accompanied by an economic recession and high unemployment. But bear markets can also be great buying opportunities while prices are depressed.
After a spectacular 2023, stocks are off to the races again in 2024. YTD, the Dow is up 2.72%, the S&P is up 7.28%, and the Nasdaq is up 6.41%. (And that's on top of last year's 13.7%, 24.2%, and 43.4% respectively.)
The bounce-back from the 2008 crash took five and a half years, but an additional half year to regain your purchasing power.
Bear markets are a normal part of investing. Bear markets have historically varied in length but stock markets have always recovered from them.
As shown in the table below, the recovery period for U.S. stocks has been as long as 15 years: In the wake of the 1929 Crash, the IA SBBI US Large Stock Index didn't fully recover until late 1944. For gold bugs, the longest recovery period spanned more than 26 years (from October 1980 until April 2007).
Investing in a bear market
Investors can look forward to strong returns once the bear market ends. According to the Wells Fargo Investment Institute study, the average 12-month return after the end of a bear market is 43.4%.
After 2000, the S&P 500 took more than four and a half years to recover to new all-time highs. The tech-heavy Nasdaq took an incredible 15 years to fully recover from the post-bubble bear market.
What was the longest bear market?
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). markets, or one about every 1.5 years. Since 1945, there have been 15—one about every 5.1 years.
Few would dispute that the crash of 1929 was the worst in history. Not only did it produce the largest stock market decline; it also contributed to the Great Depression, an economic crisis that consumed virtually the entire decade of the 1930s.
But emotionally, it's hard to hold on to assets that are losing value for weeks or months at a time. Exercise prudence and patience, and keep a strategic eye on downtrodden, yet valuable, assets. A bear market may not be a time to reap gains, but it's arguably a great time to sow the seeds for the next bullish season.
Third, many Wall Street analysts predict that the S&P 500 will jump in 2024, but with a lower return than last year. Sure, they're guessing, just as I am. However, they think that moderating inflation and the potential for interest rate cuts should be good for stocks.
Fortunately, analysts see positive earnings and revenue growth for all eleven market sectors this year. The healthcare sector is expected to generate a market-leading 17.8% earnings growth in 2024, while the information technology sector is expected to lead the way with 9.3% revenue growth.
"Some traders predict a flat or down market in the first half of 2024 due to high inflation, recession fears and rate hikes from the Fed. However, others foresee a bull market continuing, citing potential Fed rate cuts, earnings growth and historical trends around election years."
Less than two years later, US stock markets surpassed their pre-crash highs.
And the shocking leader of the bunch? President Calvin Coolidge, who took office in 1923, whose stock price performance change was a whopping 208.52%, for an average monthly return of 1.74%. That's the largest for any president since the start of the 20th century.
The Dow Jones did not return to its peak close of September 3, 1929, for 25 years, until November 23, 1954.
It ends at the final peak before a subsequent decline of 20%. It defines a bear market as a decline of at least 20% in the S&P 500 from its previous peak. It ends when the index reaches its low before then going on to set a new high. S&P uses closing prices for its calculations.
What happens after a bear market ends?
During past bear markets, the type of stocks that have tended to recover first are those considered to be "defensive" in nature. These include stocks in sectors such as utilities, consumer staples, and healthcare, as well as high-dividend-paying stocks and those with strong balance sheets.
In the fourth and last phase, stock prices continue to drop, but slowly. As low prices and good news starts to attract investors again, bear markets start to lead to bull markets.
Using the Russell 3000 returns since 1980, JPM concluded that roughly 40% of all stocks had suffered a permanent 70%+ decline from their peak value. These are not temporary declines during the tech boom-bust or during the financial crisis, but declines that were not subsequently recovered.
The United Kingdom did not return to the same market level until May 1987 (only a few months before the Black Monday crash), whilst the United States did not see the same level in real terms until August 1993, over twenty years after the 1973–74 crash began.
- Cyclical stocks. Cyclical stocks are virtually the definition of stocks that get hit hard going into a recession, as investors anticipate a peaking economy and begin to sell them. ...
- Small-cap stocks. ...
- Growth stocks. ...
- Real estate. ...
- Consumer staples. ...
- Utilities. ...
- Bonds.
