Market dips aren't fun for anyone. In fact, they stink. However, as a long-term investor (time horizon greater than 5 years), it is very important to consider market movements in historical context. Here is information that might add perspective:
- Bear markets are normal.1 There have been 26 bear markets in the S&P 500 Index since 1928. However, there have also been 27 bull markets, and stocks have risen significantly over the long term.
- Stocks lose 36% on average in a bear market.1 By contrast, stocks gain 114% on average during a bull market.
- Bear markets can be painful, but overall, markets are positive the majority of the time. 1 Of the last 92 years of market history, bear markets have comprised only about 20.6 of those years. Put another way, stocks have been on the rise 78% of the time.
- Bear markets tend to be short-lived. 1 The average length of a bear market is 289 days, or about 9.6 months. That’s significantly shorter than the average length of a bull market, which is 991 days or 2.7 years.
- Every 3.6 years1: That’s the long-term average frequency between bear markets.
- A bear market doesn’t necessarily indicate an economic recession1,2. There have been 26 bear markets since 1929, but only 15 recessions during that time. Bear markets often go hand in hand with a slowing economy, but a declining market doesn’t necessarily mean a recession is looming.
Assuming a 25-year investment horizon, you can expect to live through about 7 bear markets, give or take1. Although it can be difficult to watch your portfolio dip with the market, it’s important to keep in mind that downturns have always been a temporary part of the process.
It is times like this, during the ebb part of a market/economic cycle, that can be emotionally challenging. But the good news is, using history as a guide, patience pays off. Remember, you only lose when you sell in a down market. Until then, the value is adjusting daily.
S&P 500 Index is a market capitalization-weighted price index composed of 500 widely held common stocks.
Some content taken from Hartford Funds “10 Things You Should Know About Bear Markets” article. To read the full article go to: https://www.hartfordfunds.com/practice-management/client-conversations/managing-volatility/bearmarkets. html
1 Source for bear/bull market stats is Ned Davis Research as of 12/15/21 unless otherwise noted.
2 Source: National Bureau of Economic Research, 9/20
Some content taken from Hartford Funds “10 Things You Should Know About Bear Markets” article. To read the full article go to: https://www.hartfordfunds.com/practice-management/client-conversations/managing-volatility/bearmarkets. html