Average Duration of Previous Bear Markets

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On July 7, 2008, the S&P 500 went into bear market territory upon sliding 20% from its October 9th 2007 all-time highs at 1565.15. The current bear market correction has been going on for more than nine months. So how long do bear markets last, on average?

From the table below one could see that the average duration of bear markets has been about 18 months since the great depression. Since 1956 however the average duration of bear markets has been about fourteen months. The average decline since 1929 has been 38.2% versus 31.8% since 1956.

It has taken the S&P 500 about 5.2 years on average to recover from to above its bear market highs since 1929. If we check the same parameter starting in 1956 the average recovery time from a bear market comes out to 2.8 years on average.

If history can be of any guidance, the S&P 500 could continue falling for five to nine more months by fourteen to twenty-two percent from current levels. This means that the S&P 500 could fall to as low as 967 to 1068 until the end of 2008.

While past performance seldom guarantees future results, one thing will stay true – investors who are greedy when others are fearful will reap huge benefits over the next few years as they scoop up good quality, dividend-producing companies at bargain prices. If you don’t agree with me, please check out Buffett’s recent involvement in WWY and ROH acquisitions.