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Bear Market Recoveries
May 03,2007 00:00
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Bear Market Recoveries Table 1-6 provides data on how long it takes to break even, assuming a buy-and-hold approach with the S&P 500 Index, once a bear market has reached bottom. Also shown is the combined time of the drop and the time to recovery. Unbelievably, it took over 25 years for buyand- hold investors to break even from the ravages of the Great Depression. (Note, the 25 years does not include a calculation for reinvested dividends, which would have shortened the period.) Do you really want to wait this long just to get your money back, assuming you didn’t sell at the bottom and didn’t get back in the market? Do you think the average investor was able to take the pain of an 86 percent drop and wait 25 years? I certainly don’t. From 1956 through July 2002, the average bear market lasted 421 days (1.15 years), resulting in an average loss of 30.2 percent. The average recovery period to reach the previous high was about 639 days (1.75 years). Excluding the 2000 bear market, the average bear market lasted 364 days and lost 29.6 percent. TA B L E 1-6 Time to Recoup S&P 500 Bear Market Losses Year Percent Duration Recovery Time Combined Time Began Loss Years Years Years 1929 86 2.75 25.2 27.95 1933 34 1.7 2.3 4.0 1937 55 1.0 8.8 9.8 1938 48 3.4 6.4 9.8 1946 28 1.8 4.1 5.9 1956 22 1.2 2.1 3.3 1961 28 0.5 1.7 2.2 1966 22 0.7 1.3 2.0 1968 36 1.5 3.3 4.8 1973 48 1.75 7.5 9.25 1980 27 1.75 1.9 3.25 1987 34 0.33 1.9 2.23 1990 20 0.25 0.6 0.85 2000 49 2.6 Source: Lim, Paul J., “Staying Afloat” U.S. News & World Report, Sept. 10, 2001. The data used by USN&WR was obtained from InvesTech Research and B and A Sector Watch. Note that the recovery time does not take into account dividends. L. Masonson adjusted 2000 data through October 2002 to be up-to-date. |