Our Insights

As the bear market that began in early January continues to unfold, and with much media speculation of a possible recession, it is instructive to reflect on some historic data.

  • There have been 26 bear markets in the S&P 500 Index since 1928, losing an average of about 35%. By contrast, there have been 27 bull markets with stocks gaining an average of over 110%.
  • Bear markets are normal, typically occurring as often as bull markets, however they tend to be much shorter-lived, generally lasting about 9 1/2 months. That’s far less time than the average length of a bull market, which is about 2 1/2 years.
  • Bear market frequency has declined since 1950, occurring about every 5 years.
  • It is interesting to note almost half of the S&P 500 Index’s strongest days in the last 20 years occurred during a bear market. So, it is important to persevere and stay invested through bear markets. Another over 30% of the market’s best days took place in the first two months of a bull market, before investors were even aware that a bull market had begun.
  • There is a good bit of media buzz that the US is facing a recession.  Bear markets generally indicate a slowing economy, but don’t always cause or parallel recessions. However, of the 26 bear markets since 1928, there were 15 recessions, so it has occurred somewhat over 50% of the time.
  • From a historic standpoint (approximately the last 100 years), staying invested and diversified in high quality assets, allocated among major economic sectors is the most sensible strategy because markets have been positive about 80% of the time.

Written by: Ed Crooks