Bear market background

[free4now]

I found this article interesting, especially the table listing the various historical bear markets:

Bears on the prowl in S&P 500

The S&P 500 has entered 12 bear markets since 1937. On average, they lasted 19 months and reduced the S&P 500 index by 34 percent.

 

[CitricAcid]

Oh well, for those of us who have a while before retirement, I think it is fune, considering the wholesale discount prices we will be getting on our purchases.

 

[CuppaJoe]

If it's any consolation, I started investing in equities in 1972. I'm sure that bear era plus continuing on in several bull markets is what got me to FI by age 60 despite goofing off in semi-retirement for years and never having a high salary.

 

[mike hall]

I'm not a statistics expert, and I'm sure one will come along and slap me down soon, but that data is so widely dispersed (length of bear market) that I don't think that 19 month average means much. About all you can get from the table in that article is that it's anyones guess.

 

[newporttony]

I'm not a statistics expert, and I'm sure one will come along and slap me down soon, but that data is so widely dispersed (length of bear market) that I don't think that 19 month average means much. About all you can get from the table in that article is that it's anyones guess.

I also wonder where it is written that once the market is down > 20% it must then decline to at least the average bear market decline level.

 

[free4now]

Obviously there's no reason to assume the future will be exactly the average of what happened in the past. But the data in the table was interesting to me... the fact that the longest bear was only 62 months and that most are much shorter is hopeful to me.

 

[haha]

Obviously there's no reason to assume the future will be exactly the average of what happened in the past. But the data in the table was interesting to me... the fact that the longest bear was only 62 months and that most are much shorter is hopeful to me.

I see what you mean. Only 54 months to go.

Ha

 

[ziggy29]

I also wonder where it is written that once the market is down > 20% it must then decline to at least the average bear market decline level.

I don't think anyone said it has to go down to the average *at minimum*. If that were the minimum, it wouldn't also be the average.

 

[youbet]

I'm not a statistics expert, and I'm sure one will come along and slap me down soon, but that data is so widely dispersed (length of bear market) that I don't think that 19 month average means much. About all you can get from the table in that article is that it's anyones guess.

I'm not a statistics expert either, but a guy who is once told me that any measure of central tendency means little without the corresponding measure of dispursement.

 

[ziggy29]

I'm not a statistics expert either, but a guy who is once told me that any measure of central tendency means little without the corresponding measure of dispursement.

Translation: What's the standard deviation?

 

[youbet]

Translation: What's the standard deviation?

Sure. Or the variance. Or even the range if there are only a few data points. But averages (or any of the measures of central tendency) alone are scary and frequently misused. Some of my favorite examples of this are folks' interpretations of Firecalc runs!

 

[mike hall]

Obviously there's no reason to assume the future will be exactly the average of what happened in the past. But the data in the table was interesting to me... the fact that the longest bear was only 62 months and that most are much shorter is hopeful to me.

I'm not really a cynic, and not intending to jerk your chain, but maybe the message is: The longest S&P 500 bear market was 62 months....so far.

 

[al_bundy]

the article doesn't say anything about the difference between secular and cyclical bear markets

 

[jclarksnakes]

I'm not a statistics expert, and I'm sure one will come along and slap me down soon, but that data is so widely dispersed (length of bear market) that I don't think that 19 month average means much. About all you can get from the table in that article is that it's anyones guess.

Mike,
...You are right about that table. It is impossible to interpet from the table anything about what happens in the future. To me the more important issue is what is not in that table and that is that the market came back after every one of those declines.
Jeff

 

[ikubak]

So if you define a bear market as a loss of 20% from the peak and the average bear market has a decline of 34%, then when you officially enter an average bear market, the worst part of the total decline is already over. Sure it would be great to buy when the market is down 34% and catch that bear at the bottom, but it seems to me like once you hit bear market territory (-20%) it's probably time to start buying if you have some cash you want to invest. The average bear market lasts 19 months? Then spread out your purchases over a similar period and you should do OK. Of course, if it's "different" this time, then we may all be screwed.