What ends a bear market?
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.
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.
It defines a bear market as a decline of at least 20% in the S&P 500 from its previous peak. It ends when the index reaches its low before then going on to set a new high. S&P uses closing prices for its calculations. Bull markets in both stocks and bonds are far more common than bear markets.
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.
A bull market is a period of time in financial markets when the price of an asset or security rises continuously. The commonly accepted definition of a bull market is when stock prices rise by 20%.
Economic growth actually accelerated above its 10-year average in 2023. That resilience, coupled with a fascination about artificial intelligence (AI), changed investors' collective mood. The S&P 500 soared throughout the year and finally reached a new high in January 2024, making the new bull market official.
It's likely that, if you invest in a bear market, you will at first sustain some losses that will test your nerve. Conversely, if you take profits as markets are rising, you will often see prices rise further after you have sold. However, with a long enough time horizon, you should expect to see positive results.
Yes, bear markets commonly end in capitulation, but not always. Some—like 1966 and 1982—prove that.
The worst stock market crash in history started in 1929 and was one of the catalysts of the Great Depression. The crash abruptly ended a period known as the Roaring Twenties, during which the economy expanded significantly and the stock market boomed.
For example, it took the stock market just over two years to recover from the 1987 stock market crash. However, it took the market almost six years to recover from the dot-com bubble burst in 2000. For the financial crisis of 2008, it took close to five years for the stock market to bottom out and start recovering.
How long does it take to recover from a bear market?
As shown above, recovery times vary widely and depend on the economic environment. When bear markets are not accompanied by recession, recoveries from bear markets only took an average of 10 months to reach a new record high.
It typically takes five months to reach the “bottom” of a correction. However, once the market starts to turn, it can recover quickly. The average recovery time for a correction is just four months! That's why investors with truly diversified portfolios may consider staying investing for the long-term.
Investors must settle their security transactions in three business days. This settlement cycle is known as "T+3" — shorthand for "trade date plus three days." This rule means that when you buy securities, the brokerage firm must receive your payment no later than three business days after the trade is executed.
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.
Earnings Rebound
Despite an uncertain economic outlook, the S&P 500 has rallied to new all-time highs in 2024 driven by remarkably strong underlying economic fundamentals. S&P 500 companies have reported their second consecutive quarter of year-over-year earnings growth in the fourth quarter.
As a whole, analysts are optimistic about the outlook for stock prices in 2024. The consensus analyst price target for the S&P 500 is 5,090, suggesting roughly 8.5% upside from current levels.
While stock prices may decrease, this rarely directly impacts the housing market. Whether they're buying or renting, people still need homes, and businesses still need spaces to operate in during a bear market. This makes real estate investing a viable option for investors who want to stay active during a bear market.
The current bull market that started in March 2009 is the longest bull market in history. It's topped the bull market of the 1990s that lasted 113 months. However, the current bull market, which has seen the S&P 500 rise 330% in its 10+ years, is still second to the 90s bull run, which returned 417%.
To date, the deepest, most destructive, and most prolonged bear market was the 1929-1932 slump that was accompanied by the Great Depression.
In the 694 days between 11 January 1973 and 6 December 1974, the New York Stock Exchange's Dow Jones Industrial Average benchmark suffered the seventh-worst bear market in its history, losing over 45% of its value.
What is the best investment for a bear market?
Investing in bonds may help hedge your portfolio against the ups and downs of the stock market. Cash — This can include savings deposits, certificates of deposit and money market accounts. Overall, cash investments are the safest but usually offer the lowest returns.
1966 to 1982. During this 17-year period, the Dow traded between 600 and just below 1,000, meaning that investors who had bought the top of the previous bull rally were underwater on their investments (and presumably most preferred to cash out rather than sit on their paper losses).
Basic Info. S&P 500 3 Year Return is at 33.72%, compared to 30.46% last month and 34.39% last year. This is higher than the long term average of 23.22%. The S&P 500 3 Year Return is the investment return received for a 3 year period, excluding dividends, when holding the S&P 500 index.
The current bull market started in October 2022, when the S&P 500 reached its most recent low. Since then, the index has swelled about 35 percent.
When the stock market declines, the market value of your stock investment can decline as well. However, because you still own your shares (if you didn't sell them), that value can move back into positive territory when the market changes direction and heads back up. So, you may lose value, but that can be temporary.
