Bear Market Basics

Bear Market Basics

The term “Bear Market” has been tossed around a lot lately, but what does it really mean for investors?

 For major U.S. stock indexes, a bear market is defined as a 20% decline from its most recent all-time high over a prolonged period of time. Typically, the period of decline is associated with negative investor sentiment, and expectations of a shrinking economy.

 The S&P 500 (considered the broadest measure of the U.S. economy) recently experienced a 20% decline from its all-time closing high reached on January 3rd, 2022.

 But the good news is that bear markets tend to last a much shorter period of time than bull markets. The average bear market lasts 359 days, although some of the recent ones ranged from 33 days (Coronavirus) to 1.5 years (the Dotcom bear in 2000).

 The S&P 500 closed in bear market territory on June 13, 2022, marking a 20% decline from the peak.  While it’s good to be aware of bear markets, that doesn’t mean you should fear them. They are inevitable and are part of the journey of every long-term investor. The reality is that nobody knows with any degree of certainty how long major stock indexes could remain in bear market territory.

 Regardless of the point in time of a market cycle, the disciplined long-term investor mindset should remain consistent. After all, building a secure future by accumulating assets over time will inevitably provide exposure to several market cycles and their associated peaks and valleys. 

 With that said, for some, it may be worth adjusting investments in the face of a market downturn. If you have questions about your portfolio or market cycles, feel free to contact us at 716-445-7465 or email info@buffalofirstllc.com if you have questions.