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Comparing the Last 10 Bear Markets

The US market indexes entered bear market territory in March of 2020. It has been a long time since the US has experienced a bear market, 13 years to be precise. Since the best way to learn about the present is to look at the past, it is a good time for comparing the last 10 bear markets before 2020.

They range in time from 1956 to 2020 and lasted between 18 and 87 months before a total recovery was achieved. By almost any measurement, the current 2020 bear market is the mildest on record so far. Lets look at the last 10 bear markets.

Bear Market Comparison Summary

BeginningMonths till RecoveryMax Market DropMonths Till BottomCaused By
8-6-195626-21.5%15The “Eisenhower Recession”
12-13-196121-28%7The “Kennedy Slide”
02-10-196618-22.2%8Credit Crunch of 1966
12-2-196840-36.1%181969-’70 Recession
01-12-197370-48.2%211973-’74 Recession resulting in stagflation
11-21-198024-27.1%211981-’82 recession
8-26-198723-33.5%3Black Monday
3-27-200087-49.1%31Dot Com Crash, 9/11
10-10-200766-56.8%17Housing Bubble
02-20-2020-26.7%(so far)COVID-19
AVERAGE42-35%14Generally caused by a recession
The last 10 bear markets

Comparing The Last 10 Bear Markets

Stock Market Crash
Comparing Market Crashes

Looking at the data quite a few things stand out. The average bear market lasts 42 months overall, but sees 35% drop in the stock market over 14 months before it recovers. Lets look a little closer.

How Often Do Bear Markets Occur

Between 1956 and 2020 there have been a total of 10 bear markets. This is spread out over 64 years for an average of 6.4 years between markets. Our last bear market was all the way back in 2007, or 13 years ago.

By the laws of averages we were way overdue. Previously, the last longest time between bear markets was also 13 years with the bear market starting in 2000. Also note, the 2000 bear market saw the second largest drop on record of 49.1%!

How Long Do Bear Markets Take to Bottom Out

Bear markets bottomed out over an average of 14 months from the time they begun. The fastest a market every bottomed out was in 1987 with 3 months.

If the current bear market has bottomed out, and don’t assume it has, it would win the fastest drop to the bottom at a rapid 2 months.

How Much Do Stocks End Up Dropping

On average a bear market sees a 35% decline from peak to trough. The all time peak was 56.8% caused by the great financial crises created by the housing bubble of 2007.

By comparison, 2020’s current max drop of -26.7% from peak is pretty tame. Don’t assume that stocks have found the bottom though, as of August 2020 this is still a very young bear market.

How Long Do They Last

Bear market last 42 months on average, with the shortest on record at 18 months. This is bad news for those that believe the 2020 bear market is already over. If this ends up being true, it would be by far the shortest bear market on record. Let’s just hope we don’t end up at 87 months, which is the longest on record.

Conclusion

It is interesting to look back in time comparing the last 10 US stock bear markets. It is impossible to say how bad the current bear market will get or how long it will last, but judging from the past bear markets it is likely not over yet.

Considering the economic turmoil that we may still yet have in front of us, it is a good time to review your financial positions and make sure you are comfortable you can weather the storm. Make sure your assets are diversified and that you are comfortable with your risk profile. You should be very careful with any speculative holdings that risk total loss.

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