Bear Market History
Updated: Apr 30, 2020
The Motley Fool recently put together this analysis of the last 3 bear markets to help provide additional context about how to handle the current market volatility. You can read it here.
The data doesn’t lie. Markets can recover, what varies from situation to situation is how long it takes and what that recovery looks like. The inflation and the oil crisis of the 70s saw market peaks as high as 33.55% and valleys as low as (29.72%) on the S&P and the average rate of return for investors who stuck out the entire 9-year window was 5.21%. Not great but better than selling off in the middle of a downturn and locking in a loss.
The dot-com crash of the early 2000s is something that many of you probably remember. The internet became accessible to the public and everyone wanted in on the action. What followed was a wild period of IPOs (Initial Public Offerings) where companies were wildly overvalued and cost investors a lot of money when they declared for bankruptcy. While the annual rate of return varied wildly across the Dow, The NASDAQ, and the S&P the average return over the 9-year period of market volatility ranged from 3.17% to 8.11%. Again, much better than selling off and locking in losses regardless of where you fell in that range!
Lastly, we all remember the great recession. This period of market volatility was marked by one year of precipitous decline and uneven growth after that. While the downturn itself was brutal if you had the ability to wait it out your market return over that 9-year window on the Dow was 7.28%.
The point here is that when the market gets ugly the worse thing you can do is freak out and watch the news. If you can stay calm and wait it out chances are good that things will turn around.
WHAT YOU CAN DO
Don’t sell anything
The disclaimer: By law, we are required to remind you that none of what you just read should be construed as investment advice. It is simply our team’s commentary on current events. Past performance is not an indicator of future performance or success. Consult with a licensed investment professional for more information on how markets respond in periods of volatility.