Question 1

What is a bear market?

Accepted Answer

A drop of 20% or more from a recent all-time high in a major equity index, sustained long enough that the financial press stops calling it a sell-off and starts calling it a bear market. The 20% threshold is a convention, not a law of physics. Nothing about your portfolio breaks at -19.9% and heals at -20.1%. What the number really marks is the point where the price action stops looking like noise and starts looking like a regime, the kind that changes how companies plan, how households spend, and how the Fed talks. Since 1950 the S&P 500 has crossed that line eleven times, which is roughly once a decade. Less often than the average dinner-party conversation suggests.

Question 2

What is the difference between a bear market and a correction?

Accepted Answer

A correction is a drop of 10% to 20% from a recent high. A bear market is a drop of 20% or more. The numbers are arbitrary; the difference is real. Corrections happen roughly once a year and tend to resolve in a few months without anyone losing their job. Bear markets happen roughly once a decade and tend to come with a recession, a credit event, or a structural repricing of what stocks are worth. The mechanical difference is ten percentage points. The behavioral difference is whether your manager is still hiring or quietly froze the headcount.

Question 3

How long do bear markets last?

Accepted Answer

Shorter than people think on the way down, longer than people hope on the way up. The median S&P 500 bear market since 1950 hits its low in about fifteen months and takes another fifteen months to get back to the prior high. That is the median. The tails are wider. The 1987 crash bottomed in three months. The 2020 pandemic crash bottomed in one. The 1973 oil-shock bear took 21 months down and 69 months back. The 2000 dot-com bear took 31 down and 55 back. If you sold at the bottom of either of those, you spent the next half-decade watching the index print numbers you used to own at higher prices.

Question 4

What causes a bear market?

Accepted Answer

Three things, usually some combination of all three. One, a recession, which is when corporate earnings actually fall and the price of a claim on those earnings falls with them. Two, a Fed tightening cycle that lifts the discount rate fast enough to reprice every long-duration asset in the market, which is most of what you own. Three, a shock that nobody had on the bingo card: an oil embargo, a credit event, a pandemic, a war. The 2008 bear was all three at once. The 2020 bear was the third one, compressed into thirty days because the policy response was equally compressed. The cause matters because it tells you what has to change before the bottom is in.

Question 5

How to invest in a bear market?

Accepted Answer

The boring answer is also the right one. Keep contributing to the same index fund on the same schedule you were using when stocks were higher. You are buying the same ownership stake in the same companies for less money. The reason this is hard is not that the math is complicated; the math is trivial. The reason this is hard is that bear markets coincide with everything else looking bad at the same time, which is when the case for selling sounds the most reasonable. The investors who do well across cycles are the ones who notice that their feelings about the market have predictive value in the wrong direction, and they design a system that does not let them act on those feelings. The system is the answer. Not the forecast.


Aug 1956	Oct 1957	-21.6%	15	11
Dec 1961	Jun 1962	-28.0%	6	14
Feb 1966	Oct 1966	-22.2%	8	7
Nov 1968	May 1970	-36.1%	18	21
Jan 1973	Oct 1974	-48.2%	21	69
Nov 1980	Aug 1982	-27.1%	21	3
Aug 1987	Dec 1987	-33.5%	3	19
Mar 2000	Oct 2002	-49.1%	31	55
Oct 2007	Mar 2009	-56.8%	17	48
Feb 2020	Mar 2020	-33.9%	1	5
Jan 2022	Oct 2022	-25.4%	9	15

The bear market, catalogued.

Bear markets, answered.

The bear market, catalogued.

Bear markets, answered.

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