A Quick Review of Historical Bear Markets

By Schultz Collins Investment Counsel on November 25, 2022

This article is a brief overview of historical bear markets, how the current bear market of 2022 compares statically, and the difficulty in guessing how long any bear market will last. We’ll go as far back as the 1950s, when Standard and Poor’s stock index expanded to include 500 stocks and became known as the S&P 500 Index. 

A bear market is commonly defined when the S&P 500 Index declines 20% or more from its previous peak. Using that definition, Figure 1 shows 9 different bear markets.  

Figure 1 

Data provided by Dimensional Fund Advisors as of 4/22/2022. For illustrative purposes only. 

The first bear market in the graph starts in the early 60s and lasted 6 months, during which stocks fell 22%. It was a recessionary period where unemployment had risen to 6% and GDP grew 0.1%.  

The next bear market occurred in the late 60s, and was a period marked by the Vietnam War, high inflation, and high unemployment. That bear market lasted 19 months, with stocks falling 29% from their peak.  

After a few years of market recovery, the next bear market started in 1973, and lasted 21 months. It is the longest bear market in the data we’ll look at, and the second largest downturn, given the 43% fall in the S&P 500 Index. That bear market was associated with the 1973 Oil Crisis, inflation as high as 14%, and the unemployment rate hitting 8%.  

It would be over a decade later when the S&P 500 Index faced another bear market. The stock market crashed on October 19, 1987: the day known as “Black Monday”. Stocks declined 30% during that bear market, which lasted 3 months.  

Another decade would past before two bear markets occurred around the turn of the millennium, one lasting 12 months, and the other lasting 4 months. The S&P 500 Index fell 36% in the first bear market, and after 5 months of recovery, fell 31% in the second. This period of time included the Dot-com Bubble burst and the tragic 9/11 Attacks.  

After 5 years of recovery, the Global Financial Crisis would usher in the next two bear markets. Stocks fell 51% in the first bear market, the largest declined in the data, and fell 27% in the second. The first of the two bear markets lasted 13 months, and the second lasted 2 months.  

The last bear market in our data set is the shortest: it lasted one month. In early 2020, the US went into quarantine in response to the Covid-19 Pandemic. The S&P 500 Index fell 34%, then rebounded.  

The narrative for each bear market is unique, but by using the data in the chart, we can present summary statistics on historical bear markets in Figure 2 below.  

Figure 2 

Data provided by Dimensional Fund Advisors as of 4/22/2022. For illustrative purposes only. 

We can see that historical bear markets have lasted 9 months on average but have lasted as short as one month and as long as 21 months. Furthermore, these bear markets have resulted in declines of 34% on average and have ranged from -22% to -51%. For comparative purposes, the current bear market has lasted around 10 months and has been down about 25% at its lowest so far. Although the past is not a predictor of the future, this data suggests that it’s incredibly difficult to guess if the current bear market is over or how long the current market environment will last. It’s also incredibly difficult to guess whether the S&P 500 Index has bottomed out or how much worse it can get.  

But despite going through these bear markets, the S&P 500 Index still averaged an annual return of 10%, based on data from 1957 through October 31^st, 2022. This data suggest that equity markets are likely to reward long-term investors.  

This presentation is just a brief overview of historical bear markets. If you’d like to learn more about bear markets and want help accessing how much stock market risk is appropriate for you, please reach out to our advisors.  

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Disclaimer: Schultz Collins is a group comprised of investment professionals registered with Hightower Advisors, LLC, an SEC registered investment adviser. Some investment professionals may also be registered with Hightower Securities, LLC, member FINRA and SIPC. Advisory services are offered through Hightower Advisors, LLC. Securities are offered through Hightower Securities, LLC.  

This is not an offer to buy or sell securities. No investment process is free of risk, and there is no guarantee that the investment process or the investment opportunities referenced herein will be profitable. Past performance is neither indicative nor a guarantee of future results. The investment opportunities referenced herein may not be suitable for all investors.  

All data or other information referenced herein is from sources believed to be reliable. Any opinions, news, research, analyses, prices, or other data or information contained in this presentation is provided as general market commentary and does not constitute investment advice. Schultz Collins and Hightower Advisors, LLC or any of its affiliates make no representations or warranties express or implied as to the accuracy or completeness of the information, or for statements or errors or omissions, or results obtained from the use of this information. Schultz Collins and Hightower Advisors, LLC assume no liability for any action made or taken in reliance on or relating in any way to this information. The information is provided as of the date referenced in the document. Such data and other information are subject to change without notice.  

This document was created for informational purposes only; the opinions expressed herein are solely those of the author(s) and do not represent those of Hightower Advisors, LLC, or any of its affiliates.