Here’s how long it will take for stocks to recover from a bear market

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With stocks in one of the worst losing streaks in decades, and a relentless sell-off that has pushed the S&P 500 to nearly 20% below its all-time high, recession risks are rising — but history suggests that not all bear markets will Stocks that lead to prolonged downturns typically rebound in the next year.

key facts

About the Benchmark S&P 500 fell into a bear market On Friday — down more than 20% from its January peak — and continued to hover around the zone, as soaring inflation and rising interest rates fueled recession fears.

The last bear market was in March 2020, when the coronavirus pandemic lockdowns plunged the U.S. economy into a recession, but it was unusually short compared to other bear markets in the past (the 2007-2009 bear market lasted 546 days) .

“No two bear markets are alike,” noted Bespoke Investment Group, noting that eight of the 14 bear markets since World War II have preceded recessions, while the other six have not.

Once the S&P 500 does hit the 20% threshold, stocks typically drop another 12%, and the index takes an average of 95 days to reach the end of a bear market, Bespoke data shows.

Bespoke noted that in 14 bear markets since 1945, more than half of the S&P 500 fell within two months to lows that initially fell below the 20% threshold, and forward returns were largely positive, with the index rising on average 7 times. % and nearly 18% over the 6-month and 12-month periods, respectively.

If the U.S. economy can avoid a recession, the stock market will be in a better position going forward: The bear market that occurs before a recession lasts longer (449 days compared to 198 days without a recession) and has bigger losses (on average, according to Bespoke’s data, down 35% versus 28%).

key background

It’s been decades since the stock market suffered such a long period of heavy losses. The Dow Jones Industrial Average recently lost its eighth straight week, its longest losing streak since the Great Depression in 1932, while the S&P 500 and the tech-heavy Nasdaq Composite lost seven straight weeks. The longest losing streak since 1932 when the dot-com bubble burst in 2001.

surprising fact

The last time the Nasdaq posted a weekly loss of more than 1% for four consecutive times was in 1973, 1980, 1990 and 2001, according to Bespoke data. In each case, these continuities occurred “before or long before the recession.”

what to watch out for

In 1970, 1980 and 2001, the S&P 500 fell for seven consecutive weeks or more only three times, according to Mark Hackett, director of investment research at Nationwide. “Unfortunately, the index has been negative every time for the next 12 months,” he said.The index may fall Between 11% and 24% Major Wall Street firms have already issued warnings if the economy slips into a recession anytime soon.

key offer

Edward Moya, senior market analyst at Oanda, said “persistent inflation, another policy mistake by the Fed and fears of a recession have rattled investors,” as the S&P 500 briefly fell into bear market territory. The broad sell-off is likely to “only accelerate” as investors will remain wary until the Fed “starts to show signs that they are concerned about financial conditions and may stop tightening policy so aggressively.”

Further reading:

S&P 500 briefly slips into bear market as stocks fall for seventh straight week (Forbes)

Here’s the worst for the stock market, according to Goldman Sachs, Deutsche Bank and Bank of America (Forbes)

Investors have ‘nowhere to hide’ as S&P 500 nears bear market territory (Forbes)

Warren Buffett’s $51 billion stock market shopping spree: Here’s what he’s buying (Forbes)