Bear Market Analysis

With the 4% drop yesterday, the S&P500 is now down over 21% from it’s highs of January 3rd, 2022.

A drop of 20% is often called a “bear market” so we thought we would look at all the “bear markets” we could find and see how stocks performed after they reached that magical 20% down level.

In the past, once the S&P500 reaches the down 20% threshold, forward returns tend to be better than average, especially over the following year, and in more than half (8) of the fourteen bear markets analysed, the low was within two months of the 20% threshold being reached.

Of the 6 bear markets that didn’t reach the low within two months, 3 dragged on for more than six months before the next rally of 20%+ commenced.

Performance of the S&P500 following the 20% threshold is positive across all time frames of one week, one month, 3 months, 6 months and 12 months, with the 12 month performance being outstanding at an average of +23.9%.

So, for any of you out there thinking now might be a good time to sell……history says different and we should be looking to buy, now we have reached the key down 20% level.

Of course, the problem is, historical returns cannot predict future returns and there is always the risk of more selling as happened in 1974, 2001 and 2008.


Stock values can go down as well as up. It is possible to lose 100% of your investment in a stock. Any advice given by Capital 19 is general advice only and does not take your personal circumstances into account.

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