Since 1928, the S&P 500 has experienced 21 bear markets, on average one every 4 or 5 years. The average duration of a bear market is 388 days, or just under a year when excluding longer and shorter bear markets. The average duration of a bear market for the S&P 500 is only 289 days, just over 9 months. Not only that, but once the market changes, the average bull market lasts 991 days or 2.7 years.
A bear market is a time of contraction in financial markets, generally defined as a period in which prices have fallen by 20% since a recent peak. The average duration of a bear market is about 9.5 months and occurs, on average, with a difference of about 3.5 years from each other. Bear markets often precede or coincide with economic recessions, which is part of what makes them so scary. The Fed then implemented a series of quantitative easing (QE) programs followed by central banks around the world to buy bonds and assets that would help the credit and stock markets recover.
Fortunately, there are almost the same number of bear market cases in the past where stocks plummeted but the economy didn't. Still, as the case of COVID-19 shows, bear markets can materialize, even in an otherwise healthy economic environment. Most importantly, a patient long-term investor who is diversified based on age, stage of life and risk tolerance can't just wait for a market to pass bassist, but who also benefits from it. While bear markets usually describe a period in which the S&P 500 falls by 20%, the term can also be used to analyze the performance of other market indices such as the Dow Jones Industrial Average or the Nasdaq Composite, fixed-income securities such as bonds, entire sectors of the market, commodities or even individual actions.
Like the Active Indexer Kit, you can add wallet protection if you want to hedge your bets that the bear market lasts a little longer than normal. Some analysts suggest that a bull market is at stake when the market rebounds by 20% without falling below its previous low. Investing during a bear market can be intimidating for many investors due to its unpredictable nature and potential losses. However, it's important to remember that bear markets are part of investing and that there are still opportunities to make money during these times.
With patience and diversification, investors can take advantage of these opportunities and come out ahead when the bear market ends.
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