What was the bear market in 1973?
The Bear Market of 1973-1974: The Oil Shock
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.
To date, the deepest, most destructive, and most prolonged bear market was the 1929-1932 slump that was accompanied by the Great Depression.
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. 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).
The early 1970s saw the U.S. beset with multiple challenges, including an energy crisis, the impending loss of the war in Vietnam, the Watergate scandal, and the resignation of President Richard Nixon. The stock market fell nearly 52%, contributing to a severe recession that lasted from 1974 to 1975.
The Bear Market of 1973-1974: The Oil Shock
The bear market that began in January 1973 was associated with what became known as the oil shock recession. Later that year, Arab oil producing nations instituted an oil embargo on the U.S. in retaliation for its support of Israel in the conflict known as the Yom Kippur War.
1929 stock market crash
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.
The problem with a bear market is that you can never tell whether you're at the beginning, middle, or end of it. Imagine putting all your investable funds into a bear market that just got underway. You have several months to go (you just don't know it yet).
Don't sell – rebalance
It can help make up for losses in one area with gains elsewhere. Some say that if the prospect of a bear market has you panicked, then your portfolio isn't diversified enough to begin with.
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.
What ends 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.
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.
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.
If the price of your stocks drops while you are holding it, you have not lost any money at all. Values fluctuate, but you are holding stocks, not money. It only becomes money again when you sell it. If you sell your stocks for less than you paid for them, only then have you lost money.
| ASSET | YEAR | % RETURN |
|---|---|---|
| Raytheon Technologies (RTX) | 1974 | 47.75% |
| Matson (MATX) | 1974 | 45.09% |
| Boeing (BA) | 1974 | 33.08% |
| International Flavors & Fragrances (IFF) | 1974 | 13.79% |
But realized volatility jumped from 10% to 23% over the first six months of 1973. The market was declining steadily and fairly rapidly over that period, but the countertrend rallies were large, too. By late June, the Dow was at 875. After a brief rally, it fell to 845 by late August.
Historically, the index has taken an average of 19 months to recover from bear market declines of 20% or more, as shown in the accompanying table.
Excluding the bear market that just ended June 2023, the last bear market occurred in March 2020 amid COVID-19 pandemic lockdowns that lead to a brief recession.
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.
And the shocking leader of the bunch? President Calvin Coolidge, who took office in 1923, whose stock price performance change was a whopping 208.52%, for an average monthly return of 1.74%. That's the largest for any president since the start of the 20th century.
What was the fastest stock market crash in history?
The 1987 stock market crash, or Black Monday, is known for being the largest single-day percentage decline in U.S. stock market history.
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.
Selling stocks amid a stock market downturn isn't likely to be your preference, but it might be worthwhile if circ*mstances call for it. The silver lining is that while you might end up taking a loss on your position, it's not a guarantee. Plus, there are potential investment and tax benefits to be had.
- 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.
Real Estate Investment Trusts (REITs)
Because they invest in real estate, REIT performance may be less correlated to the stock market, making them a good hedge against crashes. As an added bonus, they generally pay higher dividends than many other investments.
