-Winston Churchill
“The only thing new in the world is the history you do not know.”
-Harry Truman
Let's review the bear markets in the post-WWII era. A bear market is defined as about a 20% drop in the stock market and we’ll use the S&P 500 index as a measure of the markets.
for a better view, click on the table
A few things to note from the data:
- The market has gone down an average of 30%, 13 times in 63 years. That’s one bear market about every five years.
- Even though economic events in some of the bear markets seemed to portend the end of life as we know it, every time the market has recovered and gone on to new highs.
- Because this chart is based on the price of the S&P 500 index and excludes reinvesting dividends, it makes both bear and bull markets look worse than they really were. Our media does not understand this detail and so they report a worse-than-reality scenario in the news.
- The S&P 500 is not very diversified so better portfolios should have better results.
When you use stock market investments, bear markets come and go with regularity. We all must be prepared for them and live through them.
Thanks to Nick Murray in his book, Behavioral Investment Counseling for the inspiration for this topic.
