Global Investing

Plotlines: The 10 most recent bear markets

By Reuters Staff
July 14, 2008

The S&P 500 index plunged into a bear market on July 9 2008 — more than 20 percent below its record high close of 1,565.15 points on Oct. 9, 2007 — after ceding to the pressure of a housing slump, a credit crisis, record-high oil prices and a weakening economy.

The S&P 500 was officially introduced in 1957 but its value has been extrapolated. Since 1929, whenever the index has fallen into a bear market, it has on average shed 29.4 percent of its value for the duration of the slump, which has averaged just over a year.

The S&P 500′s worst bear market occurred in the early years of the Great Depression and stretched from April 10, 1930, to June 1, 1932.

The following is a recap of the previous 10 bear markets for the S&P 500, using “The Stock Traders Almanac 2008″ data:

Comments
15 comments so far | RSS Comments RSS

I hope the current bear market doesn’t turn out to be one of the worst on record. I wrote about this recently and it sure feels very gloomy right now with little hope on the horizion. In fact my view is that things will get much worse before they get better next year.

 

so it begins….

The bigger the boom the bigger the bust

 

Shorting bottoms is as dumb as buying tops. Everybody and their cousins are short right now.

Posted by PaulM | Report as abusive
 

Stagflation is the worst of all possible economic worlds, short of worldwide depression, because it simultaneously lowers income and raises prices. Left alone, it does not have a happy ending. Capital and intellect must be applied to the root cause of the problem: the cost and use of energy. Attacking this problem successfully will have two positive effects: 1) energy prices will come down, and 2) new economic activities, i.e. renewable energy businesses, will be created. Developing biomass, wind and solar businesses will help job creation and lower the cost of energy and materials.

 

technically, I believe SP500 should see 750 early next year.

Posted by Mitja | Report as abusive
 

Boomers entering retirement shortly will probably require several years to recoup their equity losses; if they sell now, or later at a lower Dow, they will be worse off still. Low savings, higher costs and stock losses mean a grim retirement for may Americans. It was guns or butter” and they opted for guns.

Posted by nash | Report as abusive
 

According to the graphic, you’re right AndyS. According to what causes the decline (housemarket and credit/financial), you’re right too.
The bottom line should be 750 even 500 for the SP. Not tomorrow, but by 2 to 3 years. Then, the cleaning process will have done its job.

Posted by louis | Report as abusive
 

Who can advocate the free market now? Look at the energy prices driving by specs. Look at the morgate mass evreything need to be regulated in terms of public interest, so I think these painful events will bring strong goverment regulation over corporations.

 

This inflation/stagflation lead by corporate greed that created the sub-prime fiasco and complicated by high energy and commodity prices, the consumer is squeezed, let us hope a much lower dollar will revive exports, consumers can no longer lead a revival.The comment on shorting is only partly true because shorts must cover sometime leading to a rebound, This is exiting the market.

Posted by farid bashir | Report as abusive
 

Basically we have lost a lot of cash over the past few months. The portfolio of many retail investers have indeed become illiquid. This will likely continue till middle of next year and might start recovering post july 2009. Till then let’s keep our fingers crossed till then.

 

The Fed’s hands are tied as they cnnot raise interest rates without killing the financial market.

As it is, the rescue of Fannie Mae and Freddie Mac may requires printing more money and further deflate the dollar.

The writing off of toxic assets should continue all the way till 2009, the worst is yet to come.

Jeff
http://jeflin.net

 

I am flabergasted.

Posted by Alan Greedspam | Report as abusive
 

I am long on my shares/funds. The crash and bear markethas no impact on folks who arent retiring for another ten plus years and who have no intention of selling their shares or funds in he next five years. I’m sitting back , pouring another drink and watching events and history unfold. Kind of exciting dont you think? Unless world war three happens, I predict in five years you will be twenty percent up from your losses today. Hold on tight and try not to worry too much.

Posted by Galo | Report as abusive
 

yeah put your head in the sand and keep it there…

Posted by bud | Report as abusive
 

The graph only displayed the beginning of the trend, which was started by reinsurance companies overbooking their coverage, and bad debt being sold as an asset. A natural cyclical bull / bear market can be seen, but it has been increased since the 90′s.

 

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