How long will this bear market last? Here’s what history shows | personal financing

(Catherine Brooke)

Officially, we’re in a bear market – that’s when stocks close 20% less than their most recent high. The question on every investor’s mind: How long will this bear market last?

Nobody really knows the answer. Sure, critics will try to predict (or guess), but these predictions will cover every possible outcome, from a quick, painless recovery to a prolonged downturn, the likes of which we’ve never seen before.

However, a look back tells us that alcohol market You are likely to fall between these two extremes.

What does history say about bear markets?

Since 1950, Standard & Poor’s 500 It has fallen by more than 20% on 11 occasions. Here are some interesting data points about those withdrawals, according to a new report from Yardeni Research (PDF).

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  • The bear market took place in the early 2000s 929 days to reach the lowest point. That’s about two and a half years. This bear market occurred after the astonishing rise of Internet stock In the late nineties.
  • The second longest bear market started in 1973 and has continued 630 days to reach the bottom. Factors contributing to the downturn were inflationSlow economic growth and political turmoil surround US President Nixon.
  • The bear market continued in the early 1980s 622 days Before stocks start rising again. Inflation has played a role here, too. The Fed took a tough stance against price hikes by raising the fed funds rate to 20%. A recession and high unemployment rates ensued.
  • The shortest bear market in history was recession of 2020, due to lockdowns and the uncertainty associated with the pandemic. Only stock prices fell 33 days before returning to growth.
  • On average, except for this current cycle, bear markets continue 388 days – Or just over a year old.
  • Excluding the longest and shortest bear markets for 2000 and 2020, respectively, the average bear market duration is almost exactly One year.
  • Since 2000, there have been only three bear markets that do not include this market. Two of the three lasted longer than the one-year average.

Image source: Getty Images.

Investing in a bear market

Perhaps the most informative thing the history of takeaways has to offer is that bear markets have always given way bull markets. If you can avoid selling your property, or even better, investing throughout the downturn, you’ll be well positioned to make solid gains on the other side.

Admittedly, continuing to invest in a bear market is emotionally challenging, but you can make small changes to your investing approach to make it easier. For example:

  • If you are light on cash savings, you can temporarily increase your emergency fund deposit. An extra liquidity cushion can help you avoid hitting your portfolio when stock prices drop.
  • may tend to dividend stock More than in the past. Whether you reinvest your earnings or take them in cash, you will appreciate stability in the midst of a bear market.
  • You may rethink your ability to take risks. Except for the traffic lights in 2018 and 2020, the market has been going strong for years. In bull markets, it’s hard to estimate how much risk you can take – now is the time to ask that question. If you invest more aggressively than you’d like, you can increasingly offset these risks by adding more conservatism, excellent positions.

This bear market will also pass

Bear markets are always uncomfortable for investors. Fortunately, as history has proven, they are also temporary. You and your wealth can survive this cycle – often without changing your investment approach at all.

If you have to make changes, do so gradually. Avoid panic selling and major reallocations if you can. Patience will pay off, because there has to be another bull market in our future – and you want to enjoy your share of those big companies. recovery gains.

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