It’s been some time however we’re again:
After slightly greater than two years, the S&P 500 lastly took out the highs from January 2022 on Friday.
New all-time highs!
This bear market felt nasty in 2022 however it was pretty run-of-the-mill when put next with the largest downturns over the previous 70+ years.
Right here’s an up to date desk of S&P 500 bear markets since 1950 together with the variety of days it has taken to go peak-to-trough together with the prior peak-to-new highs:
The typical bear market since 1950 has seen a drawdown of 35%, taking 381 days to backside out and greater than 1,100 days to go from the prior peak to new all-time highs.1
That is the type of factor it’s best to anticipate to occur each 5 – 6 years.2
In fact, we’ve now skilled two bear markets in 4 years however that’s how market averages work. You possibly can’t set your watch to those issues.
So what occurs subsequent?
I don’t know, after all, however it’s fascinating to take a look at what’s occurred after the inventory market hit new highs following bear markets prior to now.
Right here’s a have a look at the one, three, 5 and ten yr returns3 from new highs following a bear market:
More often than not new highs are adopted by extra new highs. The typical one, three, 5 and ten yr complete returns following new highs had been +16%, +27%, +59% and +206%, respectively.
That’s fairly good.
Actually the one time new highs had been hit and one other bear market rapidly adopted was in 2007. New highs got here in Could 2007 whereas the height for the Nice Monetary Disaster got here in October of the identical yr.
The early Seventies skilled two dreadful bear markets in brief order as properly.
As at all times, there are exceptions to the principles in relation to the markets.
I don’t know what occurs from right here. It’s anybody’s guess.
What I do know is that pondering and appearing for the long run is often rewarded in relation to the inventory market.
Staying the course nonetheless works.
Additional Studying:
Staying the Course is Tougher Than it Sounds
1If you happen to had been to take out the three largest crashes (1973.1974, 2000-2002, and 2007-2009), the typical outdated peak to new peak was a median of 614 days.
2Together with the latest one, there have been 11 bear markets since 1950 or one each six-and-a-half years.
3I needed complete returns right here since they’re longer-term, however I didn’t really feel like calculating the worth returns to the precise day (it takes a whole lot of time). So these are complete returns from the primary full month after new highs (that means the returns are most likely even a tad understated). Shut sufficient.
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