A Historical Perspective on Recent Bear Markets

by: Barry Ritholtz

Via Jim Stack's Investech, is this interesting view of how prior Bear Markets compare relative to the most recent 9% correction.

Only Jim does something a bit different -- he depicts these prior Bear Makets starting fromt he most recent, July 19 high:

Shown on this page are some the most significant bear markets of the past 40 years. In historical terms, they range from the brief and mild (1990) to the long and severe (1973-74 and 2000-02)

As you step through each, try to imagine what it would be like riding the market down – where the DJIA would be by year-end, and how your strategy might be affected if/when the DJIA broke 10,000. This will help you understand your own tolerance for risk in the current market climate, and what each would look like if it started at DJIA 14,000 on July 19, 2007

Click for larger charts68_73_bear


Now consider that since July 19 peak just over 14,000, the Dow has yet to breach 13,000 to the downside.

What is so fascinating to me, given the relative mildness of this pullback, is how much noise we have heard from the crowd -- Sturm und Drang -- as if this was Def Con 1. I like the way Dan Gross describes it, calling out the "motley collection of gazillionaires, conservatives, and industrialists begging the Fed to cut interest rates."

Thanks, Jim -- great stuff.