History shows that economic expansions and bull markets do not last forever. According to the National Bureau of Economic Research, U.S. expansions from 1945 to 2020 have lasted about 64 months on average. The current expansion began in May 2020 and has now lasted roughly 76 months, already longer than that historical average.
A bear market is generally defined as a decline of at least 20% in a major stock market index from a recent high. According to Fidelity, U.S. stocks have entered bear market territory about once every six years on average over the past 150 years, with a median decline of roughly 33%. That does not mean that the bear market is due immediately, but investors who remain in stocks for decades should expect to encounter major market declines along the way.
Missed Nvidia in 2009? This Rare Signal Is Flashing Again. In 2009, a "Double Down" signal flashed for a little-known chipmaker called Nvidia. For the first time in years, that same "Total Conviction" signal is flashing for a company 1/100th the size of Nvidia. Continue »
So what's the best strategy for investors aiming to navigate a future bear market? Here's what you should know.
S&P Dow Jones Indices, a division of S&P Global, studied what happened when investors waited for the S&P 500 (SNPINDEX: ^GSPC) to fall 20% from an all-time high. Across nearly seven decades, investors waited an average of three years for a bear market. However, the median eventual entry was only 1.7% below the starting level.