Q&A – How Long Do Bear Markets Last & How Low Do Stocks Go? - Driven By Braman Motorcars
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Today’s Entry: Brian- thank you for being a voice of reason amid the market panic. My question for you is this. How long do bear markets usually last and is there anything you can compare this one too?
Bottom Line: The bull market is gone, and the bear is out of hibernation but for how long? By the end of last week, the Nasdaq and Russell 2000 were in bear market territory, during Monday’s wild trading the S&P 500 also touched bear market territory – a decline of 20% or more from highs. As I mentioned on Monday in my takeaways every bear market in American history has proved to be a historically great buying opportunity. Unless you think what we’re currently in is truly the beginning of the end for our country this time won’t be any different. If you are thinking of buying, history suggests that you don’t necessarily need to be in a hurry but that you also shouldn’t just sit on your hands either because they can come to an end rather quickly as we saw with the bear market, we experienced most recently.
Over the past 100 years the S&P has experienced 14 bear markets, so on average we’ll have one about every seven years – although this marks the third one in a little over five years. Here’s the breakdown of the five we’ve had this century:
2024
- Peak: February 19th
- Trough: ?
- Decline: ?
- Duration: ?
- Context: President Trump’s reciprocal tariff policy
2022
- Peak: January 3, 2022
- Trough: October 12, 2022
- Decline: 25%
- Duration: 9 months
- Context: Inflation surged, Fed rate hikes, and geopolitical tensions (e.g., Ukraine war) pressured markets.
2020 (COVID-19 Crash)
- Peak: February 19, 2020
- Trough: March 23, 2020
- Decline: 34%
- Duration: 1 month
- Context: The fastest bear market ever, driven by pandemic lockdowns, though it quickly recovered due to massive stimulus.
2007-2009 (Global Financial Crisis)
- Peak: October 2007
- Trough: March 2009
- Decline: 57%
- Duration: 17 months
- Context: Housing market collapse, subprime mortgage crisis, and Lehman Brothers’ failure triggered a global meltdown.
2000-2002 (Dot-Com Bust)
- Peak: March 2000
- Trough: October 2002
- Decline: 49%
- Duration: 30 months
- Context: The bursting of the tech bubble after years of speculative internet stock mania.
So, with this mix we’ve had a little bit of everything with losses as shallow as 25% and as large as 57%. They’ve lasted for as little as about a month for up to two and a half years. So, bear markets have brought about a little bit of everything. If you play the recent averages, bear markets have lasted for 14 months with an average decline of 41%. So, in other words, if the average scenario played out, we’re only about halfway to the bottom of the bear market at this point and we’d not exit the bear market until next April. And that takes us to the second question asked today. About whether there’s anything we can compare this one to?
The knee jerk reaction would be to tie this bear market to the infamous Smoot-Hawley Act of 1930 during the Great Depression because that was all about tariffs too. The difference is that the economy was already a disaster when it passed, and the policy was a law as opposed to an executive order that President Trump could change at any time.
And it’s on that note that we don’t have a comp for this. If I had to pick, I’d say this one is most similar to the pandemic. Every bear market has a catalyst – however most are macro-economic related. This one isn’t, as it’s self-inflicted. The pandemic bear market, that was the shortest-lived, also wasn’t macro-economic related. It was executive action to shut things down that did it. That’s somewhat analogous to what’s happening with tariffs right now. Now, President Trump believes the ends will justify the means – which will be determined somewhere down the line. For now, though, that’s what we know using history as a guide.