Since the beginning of the year, the stock market performed very poorly, given that many companies reached the territory of the Bear market. Despite this, the S&P500 index succeeds in avoiding the 20% correction (a decline in 20% or more is considered a Bear market).

 

Here are 5 things you need to know about the Bear markets.

1. Since World War II, there are 17 corrections which meet the above said definition (or a close to it). The average decline is about 30% and lasts approximately a year.
 

 

2. If we divide the Bear market between two types – accompanied with a recession and those without a recession and we will notice that those with recession, of course, last longer and lead to deeper corrections – an average of 34,8% correction and last nearly 15 months. In the last 50 years, a correction over 20% without a recession has happened only once and this is the 1987 crash.
 

 

3. Markets can be very volatile even during economic growth when the average correction in such a period is about 17,1% (from the highest to the lowest point of the correction). Bear markets are not an uncommon phenomenon even in the brightest moments in an economic cycle. The data from the graph below helps us in knowing the current situation in perspective. The good news is that a year later with such similar lowering, S&P500 is rising with an average of 32%. This is what many of the investors are hoping to happen.
 

4. On the next graph, the fastest Bear markets are displayed. It is not surprising that the crash in March 2020 during the pandemic was the fastest to date. Only for 16 trading sessions, the market reached from the historic peak to the territory of -20%.
 

5. Currently, the third year from the current bull market is happening and it tends to have lower return, which is increasing with an average of 5%. In fact, since World War II, there have been 11 bull markets and only three of them ended during their third year.
 

These are the 5 things that you need to know about the Bear markets.

One more interesting fact! Since 2001, the market didn’t have seven consecutive weeks in the red zone. What is more interesting is that when there is a streak of six consecutive losing weeks with a total decline of 10% (what the case currently is), the future return is about 9,9% over the next six months and 29,2% a year later.

 

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Disclaimer:

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