What happens after a bear market ends?
The S&P 500 has weathered 29 bear markets since 1928, with stock values decreasing by 36% on average each time. However, there have also been 27 bull markets—typically following the end of a bear market—with stock values increasing by 114% on average.
A bull market is often defined as a period during which a major market index has risen by 20% from a recent low.
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.
One thing to keep in mind during bear markets is that you aren't going to invest at the bottom. Buy stocks because you want to own the business for the long term, even if the share price goes down a little more after you buy. Build positions over time: This goes hand in hand with the previous tip.
Stage four is anticipation.
This is when stocks start their recovery. As with the bear market's beginning, almost nobody recognizes its end until after the fact. The news at the time tends to be almost unrelievedly grim, accompanied by articles about how stocks' golden days have passed.
A bear market is typically defined as a market that falls more than 20% from its most recent peak. According to Wall Street veteran Bob Farrell, who combined technical analysis with various measures of investor sentiment, a bear market has three stages—sharp down, reflexive rebound, and drawn-out fundamental downtrend.
The September 11 attacks caused global stock markets to drop sharply. The attacks themselves caused approximately $40 billion in insurance losses, making it one of the largest insured events ever. Downturn in stock prices during 2002 in stock exchanges across the United States, Canada, Asia, and Europe.
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.
What is the longest time for the stock market to recover?
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).
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.
Lower valuations on equities are offered, which reduces risk for equity investors. Notable investors build cash prior to a bear market, to purchase stocks at low valuations in a bear market, the very impetus of new bull markets. Significant buying opportunities are presented.
If housing prices are down because real estate is in a bear market, you could be in a great position to bargain shop for properties. Even when the economy falls into a recession, people still need housing which could enable you to collect a steady flow of rental income.
Behavioral risk: During a bear market, investors may be more likely to make emotional decisions, such as selling their positions based on fear or panic. This leads to unwise investment decisions and significant losses.
Across the 10 bear markets since 1950, the longest was 929 days and the shortest was 33 days. Since 2000, there have been only three bear markets not including this one.
If we take the 289-day average for bear markets into account, the S&P bear market could end in March 2023, and the S&P 500's could end in July next year. Of course, like all things stock market, there is a ton of uncertainty around the bear market, and it's impossible to predict when it will end for sure.
Bear Markets In the U.S. Since 1928
There have been 28 bear markets since 1928. The average decline was 35.62%, and the average length of time was 289 days.
The largest single-day percentage declines for the S&P 500 and Dow Jones Industrial Average both occurred on Oct. 19, 1987 with the S&P 500 falling by 20.5 percent and the Dow falling by 22.6 percent. Two of the four largest percentage declines for the Dow occurred on consecutive days — Oct. 28 and 29 in 1929.
Are we in a bear market rally?
More than 60% of respondents believe the stock market's gain this year has just been a bear market bounce, seeing more trouble ahead. A total of 39% of investors believe we are already in a new bull market. The S&P 500 has fallen more than 5% this month alone, cutting its 2023 gains to 11%.
As it turns out, the data says it couldn't be truer. Money is made in bull markets. But fortunes are made by those who buy the dip in bear markets. Here's a deeper look.
A bear market is a financial market experiencing prolonged price declines, generally of 20% or more. A bear market usually occurs along with widespread investor pessimism, large-scale liquidation of securities and other assets, and a weakening economy.
On March 11, 2020, the Dow Jones Industrial Average (DJIA) entered a bear market for the first time in 11 years amid the economic impacts of the COVID-19 pandemic. 1 The Dow Jones Average fell from nearly 30,000 to under 19,000. The S&P 500 and the Nasdaq followed suit shortly after.
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.
