Investment News & Views

The History of US Bear Markets and Recoveries

The bull market that started in March of 2009 was the longest in the history of the S&P 500. That bull market has ended and on the 12th March 2020 the market became a bear market. Bear markets are periods when the stock market declines by 20% or more from a recent peak. Using the S&P 500 index as a measure, there have been 16 bear markets since 1926, averaging once every six years. They last an average of 22 months, and the market loses an average of 39%. Of course, there was significant variability of outcomes around these averages.

In every case though, markets have recovered, and often have made sizable gains in the months immediately following the downturn. The following table documents the various bear markets that have occurred (excluding the current one) and the returns one year after the trough occurred. The duration of the bear market is measured as the time it takes for the market to recover the full loss.


Peak Trough Duration (months) Bear market magnitude 1-Year return after trough
9/3/1929 7/8/1932 34 -86% 124%
3/10/1937 4/28/1942 61 -60% 59%
10/9/2007 3/9/2009 17 -59% 68%
3/24/2000 10/9/2002 31 -49% 34%
1/11/1973 10/3/1974 21 -48% 38%
11/29/1968 5/26/1970 18 -36% 44%
8/25/1987 12/4/1987 4 -34% 23%
5/29/1946 6/13/1949 37 -30% 42%
12/11/1961 6/26/1962 6 -28% 33%
11/28/1980 8/12/1982 21 -27% 58%
2/9/1966 10/7/1966 8 -22% 33%
8/2/1956 10/22/1957 14 -22% 31%
7/16/1990 10/11/1990 3 -20% 29%
09/20/2018 12/24/2018 3 -20% 37%
Average 22 -39% 47%

It is noticeable that in 10 of the bear markets the return one year after the trough has been greater than the magnitude of the drop during the bear market period. This suggests that if you are able to time the bottom of the bear market then often there are significant gains to be made in the year after. However, it is notoriously hard to identify the bottom of a bear market in real time. Relief rallies are common during bear markets and what might appear to be the beginning of the recovery phase turns out to be a relief rally on the way down to the bottom of the bear market. A rally in the S&P 500 occurred in the days after the recent low of 2237 on the 23rd March. It is too early to tell whether that marks the trough of the current bear market or that further falls will occur.

With the Guardian Portfolios we monitor the markets daily to try and identify when a sustained trend upwards has emerged which would signal our re-entry into the markets. On the 1st April our trend signals indicated upward trending movements in our Japan, International and US equity funds. The bond funds also indicated positive (small) upward movements, particularly for US Treasuries and UK gilts. We therefore decided to make a cautious move back into some bond funds and one third into our Japan, US and International equity funds. This partial re-entry into some of the equity funds positions us to take advantage of any recovery in equity markets. We are of course mindful of the fact that these markets may yet fall further and so monitoring of trend signals will continue.

  • Thursday, April 9, 2020

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Professor Mike Buckle

Investment Officer

Mike chairs Crossing Point’s Investment Management Committee and holds the CII Certificate in Discretionary Investment Management.