If the world stock market turns bearish these are the historical falling averages

Bear markets are typical of all markets. The most recent in global equities was the result of the health crisis caused by the Covid-19 pandemic which, economically, led to forced closures for companies and, financially, volatility broke out in the markets.

But what do bear markets look like? Has the latter strayed far from the historical average? Because US equities represent 60% of the global stock and are highly correlated with other stock market environments, we will focus primarily on this one.

What are bear markets like?

First of all, we must define what a bear market is. This is a prolonged market period in which an investment has falling prices. It is typically characterized by a stock market that has fallen by at least 20% from its previous high.

Historically, bear markets have been repeated over the years, as investor expectations are discounted through prices. We look at its structure and its main characteristics.

Taking US equities represented by the S&P500 as a reference, losses in a bear market are 35.62% - bull markets add up to an average revaluation of 114%-. Comparatively, the last bear market the S&P500 experienced, the index fell 33.92% so we were very close to the historical average

They are more frequent than many may believe as a result of the mirage of recent years. We have seen 26 bear markets since 1928.

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It should also be noted that a bear market does not always go hand in hand with an economic recession. The most obvious proof is that there have been those 26 bear markets since 1929, but only 15 recessions during that time. Bear markets often go hand in hand with a slowing economy, but a declining market doesn't necessarily mean a recession is on the way.

It is said that when the market goes up it does so by the stairs and when it goes down it does by the elevator, and the statistics back it up. Bear markets tend to be short-lived. The average duration of a bear market is 289 days, or about 9.6 months. That's significantly shorter than the average duration of a bull market, which is 991 days, or 2.7 years.

The last bear market was exceptionally short, 33 days to sign the lows, the shortest in the last century.

On average, **every 3.6 years we would see a bear market*. For its part, while the bull market that ended in 2020 is considered by many to be the longest on record, the longest from December 1987 to the March 2000 dot-com crash is technically the longest—a drop of 19.9% ​​in 1990 almost made him jump.

Despite multiple bear markets, they have been less frequent since World War II. Between 1928 and 1945 there were 12 bear markets, that is, one every 1.4 years or so. Since 1945, there have been 14, one every 5.4 years or so.

The Four Worst Bear Markets

Bear markets can be very intense, the following four bear markets have been the worst in the last century:

Of those, the bear market from September 1929 to June 1932 resulted in an 86.2% loss for the S&P. The others aren't even close, with losses of 56.8% in 2007-09, 49.1% in 2000-02, and 48.2% in 1973-74. After the crash of 1929-32, the stock did not recover its previous high until 1954.

As an interesting fact, three of the four worst bear markets were preceded by high valuation. Among the four worst bear markets with more than 40% losses, they started with somewhat of an extreme market valuation. The one exception is the 1973 bear market caused by the Arab oil embargo and subsequent recession, but it also had an above-average P/E at first.