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Bear Markets Just Keep Happening Thumbnail

Bear Markets Just Keep Happening

If you’re a regular follower of the media, you’ve probably read that the stock market has either just crashed or is about to crash.  The media has decided that these are the only two states of reality when it comes to reporting on the stock market.  Apparently, this is good for their business model (i.e. getting clicks) but is terrible for the average investor’s portfolio strategy.  The constant threat of “the bear” is always lurking behind the keyboards of today’s media.

Having said that, there actually was a real bear market not long ago.  Do you remember it?  It took place in the last three months of 2018, with the market reaching bottom on Christmas Eve after declining nearly 20%.  Investors’ account statements at the end of 2018 fully reflected the pain of this downturn.

These meltdowns are very normal and even regular.  Since the end of World War II there have now been 15 of these market meltdowns in 74 years, or one about every 5 years.  When they do occur, the average drop in stock market prices is around 30%!  The table below summarizes each of these bear markets (with thanks to the Nick Murray company for the data on the S&P 500).


05/29/4606/13/49-29.5%36.5 mos.19.313.6
08/02/5610/22/57-21.5%14.5 mos.49.739.0
12/12/6106/26/62-28.0%6.5 mos.72.652.3
02/09/6610/07/66-22.2%8.0 mos.94.173.2
11/29/6805/26/70-36.0%18.0 mos.108.469.3
01/11/7310/03/74-48.0%20.5 mos.120.262.3
09/21/7603/06/78-19.4%17.5 mos.107.886.9
11/28/8008/12/82-27.0%20.5 mos.140.5102.4
08/25/8712/04/87-33.5%3.5 mos.336.8223.9
07/16/9010/11/90-20.0%3.0 mos.369.0295.5
07/17/9808/31/98-19.3%1.5 mos.1186.8957.3
03/24/0010/09/02-49.2%30.5 mos.1527.5776.7
10/09/0703/09/09-57.0%17.0 mos.1565.1676.5
04/29/1110/3/11-19.4%5.0 mos.1363.61099.2
09/20/1812/24/18-19.8%3.0 mos.2930.82351.1


Pretty scary stuff, right?  Why would anyone want to put their money at risk with markets like that?  The answer, of course, is because markets are our friend over the long run.

As I write this the S&P 500 stands at 3,117 which is a 32% gain over the market’s December 24th bear market bottom.  That’s great!  Measured from the pre-bear market top on September 20, 2018 the market is still up more than 6%, a modestly positive return over the last 15 months.

In the last 10 years we have experienced three separate bear markets, which is a little more frequent than one would expect.  Yet, the market is up substantially vs. all three of them:

Late 2018 bear: up 32%

Fall 2011 bear (Greek & Euro crisis): up 83%

Great Recession 2008-2009: up 361%


Clearly, based on the evidence, markets follow a gradual upward path that helps investors grow their wealth over time despite these regular setbacks.  What’s important is that we stay the course.

At Oxford Financial Partners we follow a proprietary investment philosophy called Power of 5 Investing®.  The fifth principle of Power of 5 Investing is the Five Words of Wisdom… “It’s NEVER different this time.”  In a bear market, people who think that this time is different, and that the market won’t bounce back, sell their stocks to people who understand that this time is never different. Power of 5 Investing stands steadfastly with the optimists.  Patience and wisdom are the key to making the markets work for you.

If you or a friend would like to learn more about how to harness the power of the markets to build a secure retirement, give us a call today.