What Happens When Stock Markets Become Bears (Published 2022) (2024)

FAQs

How much does the market go up after a bear market? ›

The S&P 500 has weathered 29 bear markets since 1928, with stock values decreasing by 36% on average each time. However, there have also been 27 bull markets—typically following the end of a bear market—with stock values increasing by 114% on average.

For context, the 2022 bear market lasted 10 months, and the S&P 500's maximum decline from its high point was 25%. Now that the stock market has transitioned back to a bull market, LPL Financial chief technical strategist Adam Turnquist says history suggests the S&P 500 could soon break out to new all-time highs.

Investor.gov defines a bear market as “a time when stock prices are declining and market sentiment is pessimistic. Generally, a bear market occurs when a broad market index falls by 20% or more over at least a two-month period.” A bear market is often marked by low investor confidence and a declining economy.

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. Build positions over time: This goes hand in hand with the previous tip.

It can be nerve-wracking to watch your portfolio consistently drop during bear market periods. After all, nobody likes losing money; that goes against the whole purpose of investing. However, pulling your money out of the stock market during down periods can often do more harm than good in 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.

There are no set ages to get into or to get out of the stock market. While older clients may want to reduce their investing risk as they age, this doesn't necessarily mean they should be totally out of the stock market.

Falling interest rates and earnings growth could be a bullish combination for stocks. However, some analysts are concerned about bloated valuations in the technology sector, and the 2024 U.S. presidential election could create some major volatility in the market.

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

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.

How long does it take to recover from a bear market? ›

Frank says the average bear market lasts about 9 months, but it takes much longer to recover what was lost. "If the next years are average, you're probably looking at 3 to 4 years out to get back," he says. "But that's not a guarantee, that's a long-term average."

What needs to happen for a bear market to end? A bear market is generally considered to have happened when a stock or broad index (like the S&P 500) falls at least 20% from its most recent high. The opposite is a bull market, when prices rise at least 20% from bear market lows.

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%.

Bonds also are an attractive investment during shaky periods in the stock market because their prices often move in the opposite direction of stock prices. Bonds are an essential component of any portfolio, but adding additional high-quality, short-term bonds to your portfolio may help ease the pain of a bear market.

Keep investing consistently.

By investing a fixed amount of money at regular intervals regardless of market conditions, you're more likely to be able to purchase equities at more affordable prices and potentially see the shares rise in value once the market rebounds.

The charts reveal that on average stocks are up 10% three months following the start of a recession and 15% six months after the start of a recession. More impressively, stocks have historically gained 23% and 33% in the one and two years after the start of a recession, respectively.

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.

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)