Bear markets, which signal equities losing value for a considerable amount of time, are a regular component of market dynamics. The S&P 500 has seen 26 bear markets since 1928.
Definition of a Bear Market
When the market falls by 20% or more over a minimum of two months, it is said to be in a bear market. Market corrections that cause a market decline of between 10% and 20% over a brief period of time might cause bear markets, which signify a negative tendency in the market. Bear markets can occur during recessions if there is a high unemployment rate and a decline in GDP.
Cyclical Nature Of Markets
The nature of capital markets is cyclical. Every bear market is followed by a bull market. Since 1928, there have been 26 bear markets and 27 bull markets.
Advice: Long-term investors may be upset by bear markets, but they should eventually see their portfolios rise when the market returns to being bullish.
What Happens In a Bear Market
Due of what happens, investors dislike bear markets. When markets decline, investment values also decline. It could be challenging for those looking to cash out for a profit to do so, particularly if the investment was a short-term strategy. Financial instruments like the Leading Economic Index can be used by investors as a forecasting tool for economic indicators. Another sign that a bear market could be approaching is the yield curve.
Advice: As lending becomes more restrictive and economic activity declines, the yield curve inverts.
Bear Markets In the U.S. Since 1928
Since 1928, there have been 28 bear markets. The average period was 289 days, and the average fall was 35.62 percent.
| Dates |
Decline Percentage |
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 |
Historical Bear Markets That Lead To Recessions
A recession does not always follow a bear market. Examine the bear markets that have precipitated recessions since 1928.
Bear 1: September 7, 1929—November 13, 1929
Actually, this marks the beginning of a number of bear markets that were a component of the Great Depression, which lasted until March of 1933. The stock market lost 73% of its value between these dates. This decline coincided with a 12.9% economic contraction and a peak of 24.7 percent unemployment.
Bear 2: June 1948—June 1949
Actually, this marks the beginning of a number of bear markets that were a component of the Great Depression, which lasted until March of 1933. The stock market lost 73% of its value between these dates. This decline coincided with a 12.9% economic contraction and a peak of 24.7 percent unemployment.
Bear 3: August 1956—October 1957
The GDP decreased by 4.1 percent in the last quarter of 1957 and by 10 percent in the first quarter of 1958, whilst the stock market saw a bear market that lasted 446 days and witnessed a value reduction of 21.63 percent. With unemployment reaching a peak of 7.5 percent in July 1958, the recession persisted until April 1958.
Bear 4: November 1968—May 1970
The market lost 36% of its value during this bear market, which lasted for more than two years. Beginning in December 969 and lasting until November 1970, the recession. The GDP fell by 1.9 percent in the fourth quarter of 1969 and by 0.60 percent in the first quarter of 1970 while the unemployment rate reached a peak of 6.1 percent. A temporary comeback from this recession occurred in 1971 when the GDP increased by 11.3%.
Bear 5: January 1973—October 1974
With a market loss of 48.2 percent over 630 days, this bear market was extremely long. The OPEC oil embargo was largely to blame for the economic problems that lasted 16 months during the recession. Unemployment reached a record of 9% as inflation crept into the economy.
Bear 6: November 1980—August 1982
The market as a whole fell 27.11 percent throughout the course of this bear market’s 622-day duration. Actually, there have been two recessions during this weak market. Both the first and second took place between the first two quarters of 1980 and July 1981 to November 1982, respectively. The recession resulted from the Fed raising interest rates to combat soaring inflation. The unemployment rate peaked during this time at 10.8%.
Bear 7: March 2000—September 2001
The market fell by more than 36%, and a bear market that lasted 546 days occurred. During this time, the nation experienced an eight-month recession. A crash in the dot-com sector was the main cause of the recession and market fall. The 9/11 attacks marked the end of the recession.
Bear 8: October 2007—November 2008
The market had a swift decline of over 52%, with a bear market lasting 408 days. The housing market crashed during this time period, which is referred to as the Great Recession. The GDP shrank for three consecutive quarters as the jobless rate increased to 10%. When a stimulus plan for the economy was authorized in the third quarter of 2009, the recession was still ongoing.
Bear 9: February 2020—March 2020
This was a brief bear market that lasted only 33 days but resulted in a market decline of about 34%. The COVID epidemic had a disastrous effect on the economy, which contracted by 31.4% in the second quarter. After falling by 5% in the first quarter, it did so again this quarter. The unemployment rate increased to 14.7%.
Bottom Line
Investors need to be aware that bear markets are a normal component of the market cycle and the financial environment. During a bear market, investors should be cautious with their short-term investments, but they can often endure the downward cycle with their longer-term assets.
FAQs
-
When was the last bear market?
-
- The COVID-19 epidemic began at the same time as the last bear market. The time frame was from February 19 through March 23, 2020. The market fell 35.62 percent throughout the course of the 33-day bear market.
-
How long do bear markets typically last?
-
- According to past statistics, a bear market typically lasts 289 days. On the other side, bull markets typically last 991 days. Between bear markets, there are usually 3.6 years.
-
What is the longest bear market in history?
The calculation of the longest bear market in history is a little challenging since some bear markets contain intervals that are, by definition, a “bull market.” There were 12 bear markets, or two-month or longer periods where the market fell more than 20%, between September 1929 and April 1942. The run-up to World War II is regarded as the most negative time in the history of the stock market.
