Whether a bear market is short and shallow or something worse has often hinged on whether the US enters a recession, which has yet to be determined. The study of history can inform us of what could possibly happen, but never what will happen. Unfortunately, that’s a question that can only be answered with the benefit of hindsight. Which of the 4 types of bear markets are we in today? By the low in June 1932, the S&P was 86% below its 1929 peak, and investors didn’t see a new high again until 1954. From there it would proceed to rally 47% in the most epic fake-out in market history, only to turn back down once again. It started out in a similar fashion to 1987, with an epic crash that took the stock market down 45% in a just a few short months. There’s one bear market that’s feared above all others: the 1929-32 decline during the Great Depression. 1980-82 Bear Market (-28%, 22 Months, Recession) Powered by YCharts Another interesting feature of the 1980-82 bear was how quickly the market recovered, with the S&P 500 hitting a new high in November 1982, only 3 months after the low. This is the complete opposite of what we saw in the 2020 bear that lasted only 1 month but lost 35%. In 1980-82, there was a long bear market (22 months) that featured a steady drip lower, declining 28% from peak to trough. You probably aren’t thinking about the “steady drip” type of bear market because we haven’t experienced it in 40 years, but it’s another possibility to consider. – 2007-09 Bear Market (-58%, 17 Months, Recession) Powered by YCharts With steeper declines come much longer recovery times. More seasoned market participants may recall the 1973-74 bear market which took 21 months to bottom, cutting the S&P 500 in half. The financial crisis and the bursting of the dot-com bubble both lasted more than a year (17 and 31 months) with over 50% losses. When most investors hear the phrase “bear market,” the long and deep variety is likely what comes to mind. 1987 Bear Market (-36%, 2 Months, no Recession) 1990 Bear Market (-20%, 3 Months, Recession) – 1998 Bear Market (-22%, 3 Months, no Recession) 2011 Bear Market (-22%, 5 Months, no Recession) 2018 Bear Market (-20%, 3 Months, no Recession) – 2020 Bear Market (-35%, 1 Month, Recession) Powered by YCharts And with the exception of 1987, all experienced fast recoveries, hitting new all-time highs within a year of the low. All of these bears lasted 5 months or less from peak to trough with a maximum decline of 36% in 1987. We’ve seen many short and shallow bears in recent history, including 2020, 2018, 2011, 1998, 1990, and 1987. To answer that, we often look back at history, attempting to find parallels with the past.īut even a cursory glance at a table of prior bear markets reveals the difficulty in doing so, as the lack of any consistent pattern is evident.Īll bear markets are painful, but if you had to choose one, this would be it. The question everyone’s asking: what happens next? The S&P 500 has now fallen 20.9% from its high in early January, the largest decline for the index since March 2020.
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