The current Bear Market, defined as a loss of 20% or more from an all-time high, has lasted 11 months so far. But did the market hit its low point at -25% on October 13, or will there be more declines to come? While every Bear Market is different, history can provide some perspective on where we are now. The median duration of the decline for the 11 Bear Markets charted below is 15 months while the median loss is 34%.
DURATION AND MAXIMUM LOSS OF S&P 500 BEAR MARKETS SINCE 1960 (JAN 1960 – NOV 2022)
Source: Dow Jones Indices LLC
The chart shows drawdowns on the left axis and number of months until you hit the ultimate market bottom along the bottom axis. Red dots indicate the bear market was associated with a recession, grey dots are not associated with a recession, and the yellow dot is the current bear market. Most bear markets associated with a recession are longer than 16 months, suggesting we may have more time to go before we find the bottom. Fortunately for long-term investors, timing the bottom is not required for success.
It’s important to remember that the long-term average annual stock market return of 10% includes all these downturns and recessions. Successful investing requires patience and thinking in terms of years and decades, not months and quarters. While we may become fatigued from the volatility and long grind down and anxious for positive signals, having realistic expectations can help reduce the anxiety. Things will get better, but it might just take longer than you think. For most investors, staying invested and sticking to a well-developed plan is the best course of action.
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