A 100 year old statistic with a 100% success rate guarantees that the bearmarket will pass. It will also tell you when…

Probably every novice investor would like to see the markets only in green. And maybe even the experienced ones. Unfortunately, it doesn't and can't work that way. Dips and bearmarkets are part of the market and let's be happy for them. Because every downturn can open up new buying opportunities. That's just one reason why I would recommend staying calm during a downturn. And the other is the statistic that says that so far every bearmarket has gone under at some point.

This statistic says that every bearmarket in history has been issued a stop sign

I'd like to present you with a couple of numbers today that might make you feel better from a long-term investor's perspective. They'll all be positive, for the most part... Unless you're bitter. But in that case, you're probably already familiar with these numbers 😁

The numbers and statistics speak volumes!

Market cycles are measured from peak to trough, so a stock index officially enters bearish territory (bearmarket) when the price drops at least 20% from its last high after the close of the trading day (if the drop is between 10% - 19.999%, we call it a correction). The bull market is then the exact opposite of the bearmarket. When the market gains 20% or more from its last low. Just to clarify. Now for the numbers:

Bear markets can be painful, but overall markets are positive most of the time. Out of the last 92 years of market history, bear markets have only accounted for about 20.6 of those years. In other words, stocks have risen 78% of the time.

A bear market does not necessarily mean an economic recession. There have been 26 bear markets since 1929, but only 15 recessions in that time. Bear markets often go hand in hand with a slowing economy, but a declining market does not necessarily mean a recession is coming.

On average, stocks lose 36% in a bear market. Conversely, in a bull market, stocks gain an average of 114%.
Bearmarkets are normal. There have been 26 bear markets in the S&P 500 since 1928. But there have also been 27 bull markets - and stocks have risen significantly over the long term. In fact, over the long term, stocks have always risen so far! For nearly a century.

Caution - of course I'm not saying you can't lose, to be clear!

90 years of S&P 500 history. Watch the scale! The logarithmic scale is used here. Source
Here the S&P 500 in absolute terms. Source

The markets (so we'll mostly be talking about the S&P 500, which is the main focus of most of us anyway) always rise over the long term, surpassing their all-time highs. But as I wrote above - that doesn't mean you can't lose your pants. For example, just look at the second chart - if you hypothetically put everything (which is a really bad idea) into the pre-2000 index, you would wait more than 15 years for the same value. But back to the numbers.

Bear markets tend to be short-term. The average length of a bear market is 289 days, or about 9.6 months. This is significantly shorter than the average length of a bull market, which is 991 days or 2.7 years. So if you wanted to estimate the end of the current downturn, you could try a purely statistical approach.

The long-term average frequency between bear markets is 3.6 years. Although many consider the bull market that ended in 2020 to be the longest in history, technically the longest bull market is the one that lasted from December 1987 until thedot-com crash in March 2000.

Bear markets have been less common since World War II. Between 1928 and 1945, there were 12 straight bear markets, one every 1.4 years or so. Since 1945, there have been 14 - one approximately every 5.4 years. So the pre-war years skew our statistics and averages a bit.

https://www.youtube.com/watch?v=_lx0-3vKEkw

Half of the S&P 500's strongest days in the last 20 years occurred during bear markets. Another 34% of the market's best days occurred in the first two months of the bull market - before it was even clear that the bull market had begun. In other words, the best way to weather the downturn might be to stay invested because it is difficult to time the market's recovery. But that's everyone's choice. For example, we often see the big hedge fund aces pull back a bit during downturns. But that can have a huge number of other causes.

If we go by the numbers we have now? Assuming a 50-year investment horizon, you can expect to experience 14 bear markets give or take. While it can be difficult to watch your portfolio fall with the market, it's important to remember that the declines have always been a temporary part of the process.

Of course, one never knows what the future holds. The past is also no guarantee of the future. It is at least possible to look at it and form a picture. I hope I have done that at least a little bit :)

What about you, do you believe the numbers? 😇

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Disclaimer: This is in no way an investment recommendation. This is purely my summary and analysis based on data from the internet and a few other analyses. Investing in the financial markets is risky and everyone should invest based on their own decisions. I am just an amateur sharing my opinions.

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The past is also no guarantee of the future

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