August 2022 Insight - Bull and Bear Markets

Looking at U.S. equity markets over the past 70 years, there have been 10 separate bear market events. Based on this suggests that, on average, long-term investors should expect to encounter a bear market about once every 7 years.


Key findings

Bear markets come in many shapes and sizes. Some bear markets are mild and quick, such as the 1957 bear market, in which U.S. equities fell 20.7% and then began to recover in about three months. Others have been quite severe. For example, a bear market that lasted about a year and a half during the global financial crisis saw U.S. equities fall nearly 57%.

  • Long-term resilience of markets. Regardless of the severity or duration of the pullback, markets have always rallied to new highs.
  • Lower asset prices should lead to higher long-term returns. Trying to calculate the timing of a bear market decline is nearly impossible. That said, regardless of the timing of investing during a bear market, history suggests that positive long-term returns are typically realized.

The chart below shows that every time the market has fallen a significant amount, the following year's rebound has also been significant. This pattern has been repeated in bear markets since 1950.

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