What you should know about bear markets?

Bear markets are often associated with declines in an overall market or index like the S&P 500, but individual securities or commodities can also be considered to be in a bear market if they experience a decline of 20% or more over a sustained period of time, typically two months or more.

What is typically happening in a bear market?

Bear markets are characterized by investors' pessimism and low confidence. During a bear market, investors often seem to ignore any good news and keep selling investments, which pushes prices even lower. Eventually, investors begin to find stocks attractively priced and start buying, officially ending the bear market.

How long do bear markets typically 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.

What mistakes should be avoided in a bear market?

Common mistakes to avoid when retiring into a bear market include taking on too much risk with investments, failing to diversify portfolios, making poor financial decisions due to emotions, not having an adequate emergency fund, and not taking advantage of tax-deferred retirement accounts.

How much cash should I have in a bear market?

While there is no one-size-fits-all number when it comes to how much cash investors should hold, financial advisors typically recommend having enough money to cover three to six months of expenses readily available.

How do I survive a bear market?

Keep Your Fears in Check. Use Dollar Cost Averaging. Play Dead. Diversify. Invest Only What You Can Afford. Look for Good Values. Take Stock in Defensive Industries. Go Short. More items...

What is safe in a bear market?

Government bonds and defensive stocks historically perform better during a bear market. However, most people investing for the long term shouldn't be aggressively tweaking portfolios every time there is a sell-off. The best way to go is to build a well-diversified portfolio and stick by it.

What percentage of Americans have no money in the stock market?

According to a recent GOBankingRates survey, almost half of the survey's participants reported not owning any stocks, with 22% having less than $15,000 in total stock investments.

Should you keep buying in a bear market?

Don't try to catch the bottom: Trying to time the market is generally a losing battle. 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.

What is the longest a bear market has lasted?

The longest bear market lingered for three years, from 1946 to 1949. Taking the past 12 bear markets into consideration, the average length of a bear market is about 14 months. How bad has the average bear been? The shallowest bear market loss took place in 1990, when the S&P 500 lost around 20%.

How do you make money in a bear market?

Bear market investing: how to make money when prices fall Short-selling. Dealing short ETFs. Trading safe-haven assets. Trading currencies. Going long on defensive stocks. Choosing high-yielding dividend shares. Trading options. Buying at the bottom.

How long did it take for the stock market to recover after 2008?

The bounce-back from the 2008 crash took five and a half years, but an additional half year to regain your purchasing power.

Should I rebalance during a bear market?

You should consider adopting a portfolio rebalancing strategy—even during down markets when it's tempting to let your “winners” keep growing while your “losers” are taking their lumps. That's because rebalancing helps you buy low and sell high—an investing adage that's easy to say and hard to do.

Is it easier to make money in a bear market?

Some markets, such as bonds, defensive stocks and certain commodities like gold often perform well in bearish downturns. If you have the risk appetite for it, bear markets may also be an opportunity to short-sell if trading, making a profit if you predict correctly when prices will fall (and make a loss if you don't)

Should retirees be in the stock market?

The short answer is yes. One of the most daunting aspects of retirement is making sure you have enough money to live on until you die. With looming threats of Social Security cuts, longer life expectancy and rising health care costs, making your money go as far as it can is more important now than ever before.

10 Things You Should Know About Bear Markets (2024)

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10 Things You Should Know About Bear Markets

10 Things You Should Know About seriesClient ConversationsManaging VolatilityServicing Clients

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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10 Things You Should Know About Bear Markets (2024)

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