How long do bear markets last - and what the reaction of the stock

16.08.2022

Over the years, the stock market has gone through different cycles of bear and bull markets. The bear market is inevitable and often accompanied by unpredictable price changes. In a bear market, investors are usually trying to find insights into how long prices of stocks will fall or stall. The stock and crypto markets have had their bearish moments in 2022, and many investors want to know how it'll play out and what financial decisions to make. So, how long do bear markets last, and are we in a bear market 2022?

What Is A Bear Market?

A bear market involves an extensive period of decline in the prices of financial assets. It describes a situation where there's more than a 20% drop in stock prices amidst negative economic and political events and widespread fear and doubt among investors.

what is a bear market

In a bear market, most investors are more risk-averse than risk-seeking. But are we in a bear market now, and how long do most bear markets last? Yes, the stock market is currently forging through a bearish moment, and investors are looking to find answers to how long it will last.

Some past bear markets included those during the Great Depression, which lasted from 1929-1939, the dot com bubble, which lasted five years from 1995 to 2000, and the financial crisis of 2007 to 2008.

So, while it's not easy to arrive at a defined answer to how long the current bear market will last, data from the previous bear markets can go a long way in providing insights into how the present one will play out.

Past Bear Markets

Each bear market is unique, especially because different circumstances bring them about. However, we can analyze the previous bear markets and gather data from the past century to provide clues as to what is expected in the future. So, are we officially in a bear market? With the S&P 500 decline by over 20 percent from its peak at the beginning of the year, the stock market is now officially in a bear market.

The table below contains information about the S&P 500 bear markets since 1957, including the average and median decline and the time it took for the index to reach its lowest lows.

Peak date

Trough date

Percentage decline in S&P 500

Number of days from peak to trough

7/15/1957

10/22/1957

-20.7

99

12/12/1961

6/26/1962

-28.0

196

2/9/1966

10/7/1966

-22.2

240

11/29/1968

5/26/1970

-36.1

543

1/11/1973

10/3/1974

-48.2

630

11/28/1980

8/12/1982

-27.1

622

8/25/1987

12/4/1987

-33.5

101

3/24/2000

10/9/2002

-49.1

929

10/9/2007

3/9/2009

-56.8

517

2/19/2020

3/23/2020

-33.9

33

Average

-35.56

391

Median

-33.7

67

From the table, the average best market decline since 1957 has led to a 35.56 percent decline in the S&P 500. And it took the market an average of 391 days to decline from its peak to its lowest value. So, how long do bear markets last historically, and how can we use this data to predict when the current bear market will end?

While it's possible to predict the length of time it could take for the current bear market to last, it's important to remember that each bear market is unique, and it can be difficult to conclude on a particular forecast. In addition, many factors driving changes in the market today may not influence it in the coming months.

How long does a bear market usually last?

Different bear markets over time tend to have very wide bearish periods. According to Seeking Alpha's analysis of the history of the S&P 500 bear markets, the average duration of an S&P 500 bear market since the 1920s has been 289 days or about nine and a half months.

The shortest S&P 500 bear market occurred in February 2020, following the COVID-19 pandemic, and lasted only 33 days. The financial crisis of 2008 lasted for 408 days, during which the market saw a sharp drop of roughly 52%. It was a situation that prompted people to refer to the crisis as the Great Recession; the housing crisis also occurred during this period.

So, how long do bear markets typically last? Drawing from this data, we can say that a bear market lasts for an average of 12 months. This indicates the possibility of the current bear market reaching its lowest lows in early 2023, one year after the January peak. But how long do crypto bear markets last? Or do they follow the same cycle as the stock market? No, the crypto and stock markets are two different financial markets and follow different cycles. However, they do have some form of influence over each other.

The last crypto bear market, which began in early 2018, lasted two years and six months. Crypto experts are projecting that the current crypto bear market will last about two to four years. However, many factors influence the state of the crypto market, and the bear market might wrap up earlier than projected. Regardless, crypto investors should understand how to react to the events of bear markets and how to position themselves for the best.

What should investors do during this bear market?

how long do bear markets last

Knowing how to handle your investment during a bear market is critical to avoiding bad decision-making and preventing losses. Here are some tips on navigating the current bear market as an investor.

Avoid the desire to sell

Understandably, you may feel some form of uncertainty and pain when your investment portfolio is rapidly losing value. But, how long do bear markets generally last for investors to feel pressured to sell their stocks?

When stocks lose value fast and in a short time, it could indicate a market crash, causing many to decide to sell off their investments. Investors that sell off their stocks and convert their assets to fiat money may be able to stop the pain of losing money, and it could seem like a smart decision for a while.

However, many people that sell their stocks during a bear market rarely know when to get back into the market. Cash mostly depreciates over time and is not a suitable investment for the long term. So when you sell your stocks when the market is low to get cash, you're moving against the popular axiom in the financial markets that says "buy low, sell high."

Unless you need the money for an emergency, holding your assets is best as the stock market generally performs well in the long term. You can work with a financial advisor to plan your investment portfolio effectively so you have enough cash to handle urgent matters while preserving your long-term investments.

Think of it as an opportunity

Your mindset as an investor goes a long way toward determining your overall success in the stock market. Many investors see the bear market as an investment opportunity, especially in the long term. One of the best times to invest in the financial markets is during the bear season. During these times, the price of stocks will be substantially low, allowing you to get maximum value for your money.

It can be hard to buy stocks when many opt to sell off. During this period, some investors will expound on the risks attached to investing during periods of economic trouble. When people get invested in the risks, it could result in FUD in the market, a state of fear, uncertainty, and doubt.

What happens next is that many begin to sell their stocks, but stable-minded long-term investors see these selloffs as an opportunity to rake in bargain investments. When stocks of valuable companies decline in price, investors see them as underpriced and are more likely to invest more in them in a bear market.

On average, how long do bear markets last, and what indicates the beginning of a bull market? The best-yielding investments are made by investors who bought stocks in their early years or during a bear season. While bear markets typically last for about a year, you can't know exactly when the bull market will start. But once the bull season begins, it'll be very clear as a surge in the price of stocks will follow.

Don't invest more money than you can afford to lose

bear market last

When creating your investment portfolio, make sure you diversify accordingly. Your financial planning should cover different aspects, including retirement, emergency funds, and long-term investments. You can then consider riskier investments like cryptocurrencies, and a good time to invest is during the bear market crypto season.

There are thousands of cryptocurrencies you can invest in, like Bitcoin and Ethereum. You can purchase them directly from crypto exchanges like Binance, Coinbase, or Gemini. It's important to note that crypto is highly volatile and mostly unregulated, although there are countries whose governments have enacted some crypto laws and taxation regulations.

Investing in crypto is risky, and you can lose all your capital. At the same time, you can make a high return on your investment if you invest in a good crypto coin with a good long-term performance. If you choose to invest in crypto, you must build a high-risk tolerance level and be ready to wade through market dips without giving in to the desire to sell your stake.

More importantly, you must be sure that if you lose all your crypto investments, you will still be able to pay more bills. In other words, don't invest more than what you can afford to lose; ensure you can be financially capable of reaching your financial goals regardless of how your crypto assets perform. And remember to start small when entering the crypto market so that the proportion of other investment vehicles to crypto is considerably larger.

The Bottom Line

We've explored what bear markets are and have answered the question of how long do bear markets last 2022. Investors need to understand how to handle bear markets, knowing they are part of the cycle of a normal financial market and should be expected.

Although the bear market usually drives fear, uncertainty, and doubt in the minds of many investors, leading them to panic and sell their stocks. On average, bear markets usually hit their lowest in 12 months, so selling your stocks in a bear period is not a good investing approach.

Instead, see the bear market season as an opportunity to invest in undervalued stocks or crypto assets. After that, stick to a long-term investing plan, which is a better measure of the performance of a stock.

Don't hesitate to seek crypto advice from financial advisors with relevant experience in the financial markets. They possess relevant expertise in helping you develop a working financial plan, including a well-selected list of investment vehicles to build your investment portfolio.

You can find a financial advisor or planner on organization websites like the Financial Planning Association and the Certified Public Accountants Board or by searching for a financial advisor near you. Make sure you determine how much you can afford to pay for their professional services before you select an advisor.

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