We hear the term “bear market” and may start to panic. But bear markets don’t always last long, and one can be quite different from another. There are many factors that can influence the market, making it very hard to predict its movements. If you’re worried about a bear market, know the facts.
How Long Does a Bear Market Typically Last?
A bear market is a technical term, and it means that the market has fallen 20% or more from recent highs due to widespread panic or pessimism. Bears get a bad reputation because when they attack, they swipe down with their paw, as opposed to bulls who lift up with their horns. Bear markets can be long or short. On average, a bear market for the Dow lasts 206 trading days and 146 days for the S&P 500.5 The bear market between 2007 and 2009 lasted for 546 days. But they can be much shorter, such as in 2020 due to COVID, which was followed by record market highs.6
What Do Rising Interest Rates Have to Do with It?
The Federal Reserve cut interest rates to near-zero during the pandemic and has been raising them since early 2022. Rising interest rates can sometimes cause market volatility. The market tends to respond poorly to higher borrowing costs because it makes the cost of doing business more expensive. Investors sometimes move into more defensive investments initially.7 Since World War II, 11 out of 14 monetary policy tightening cycles have been followed by a recession within the next two years.8
Will You Alter Your Retirement Plans?
You don’t have to let your retirement be held hostage by the market. With a solid plan in place, you don’t have to delay your retirement if you don’t wish to. However, if you don’t have a solid plan in place and you’re too exposed to risk, you could end up wanting to delay your retirement to give your portfolio time to recover before you start withdrawing from it to generate income. A recession could change how you make other decisions, like when to claim Social Security, when to take the big retirement vacation you’ve always dreamed of, or how much to initially distribute from your IRA.
No one can predict the future, but anyone can have a plan to help protect their savings from market downturns. To start with, know the dos and don’ts in a volatile market. This is especially important if you’re nearing or in retirement, as you have less time to rebuild your nest egg in the event of a market crash. We can help you create a plan for bear markets, short and long.
