You probably don’t need me to tell you this, but it’s been a difficult year for Wall Street and investors. When the closing bell tolled on Monday, June 13, the iconic Dow Jones Industrial Average (DJINDICES: ^DJI) and benchmark S&P 500 (SNPINDEX: ^GSPC) had tumbled 17.1% and 21.8%, respectively, since hitting their all-time highs during the first week of January. This officially placed the S&P 500 in a bear market, which is traditionally defined as a decline of 20% or more from a recent high.
The growth stock-driven Nasdaq Composite (NASDAQINDEX: ^IXIC) has performed even worse. After hitting a record high in November, the index has gone on to shed 32.7% of its value. This decline is effectively on par with the drop the Nasdaq endured during the March 2020 coronavirus crash.
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With two of the three major U.S. indexes now in a bear market, the prevailing question is: How long do bear markets last?
Here’s how long the typical bear market lasts
To be completely clear, the only true answer is that we don’t know. We’ll never know ahead of time precisely when a bear market or correction will occur, exactly how long it’s going to last, or how much the indexes are going to fall. In many instances, it’s impossible to predict what catalyst will cause a crash or correction in advance of one occurring.
However, we do have copious amounts of data that can allow investors to make educated guesses at how long or how steep a move lower in the Dow Jones, S&P 500, or Nasdaq Composite might be. For this, I turn to S&P 500 correction and bear market data aggregated by Yardeni Research (link opens PDF).
Since the beginning of 1950, there have been 11 bear market declines in the S&P 500. When I say “bear market decline,” I mean a 20% or greater drop. This means the 19.9% pullback in 1990 and 19.8% dip in the fourth quarter of 2018 are nothing more than steep corrections. Excluding the current bear market, since we don’t know how long it’ll last, here’s how long the previous 10 bear markets took to find their respective bottoms:
- 1957: 99 calendar days
- 1962: 174 calendar days
- 1966: 240 calendar days
- 1968-1970: 543 calendar days
- 1973-1974: 630 calendar days
- 1980-1982: 622 calendar days
- 1987: 101 …….