How Much Does A Typical Bear Market Fall?

In their recent episode of the VALUE: After Hours Podcast, Brewster, Taylor, and Carlisle discussed How Much Does A Typical Bear Market Fall? Here’s an excerpt from the episode:

Tobias: Yeah, I spent last week looking at– Bear markets are completely unpredictable, markets are completely unpredictable. I just was interested to see some statistics. This is what I’m going to be talking about a little bit today. I learned this morning that this is the second worst start to a year ever. The worst start to a year was 1932. It was down about 40%, I think by this point and we’re down about 22%. And so, I went and pulled up my old chart of bear markets and looked at the number of every quite a few. This is the one that goes back to 1871. This is based on the Shiller data.

Jake: Shiller, I barely knew her. [chuckles] I’m sorry.

Tobias: I’ve forgot to count them up, but I think that are a dozen or something, maybe more than that 20% since 1871. The median drop is 38%, median time period is 24 months, so, two years. But the average is a bit longer than that. The average is skewed by two that are pre the 1932 crash that they were like 10-year plus bear markets.

Jake: Can’t do that. That’s impossible now, right?

Tobias: Oh, my God, I hope so.

Jake: [laughs] They probably didn’t have as long a bull market either though then, did they?

Tobias: I’m not sure. It was a lot more volatile.

Jake: Yeah.

Tobias: Pre-Fed was more volatile. I think there were more and I would have said shallower, but that’s not true. That seems like– I don’t know. Like a 10-year bear market, there’s probably a few cyclical bulls and bears inside that. This might be a secular, that might be secular bulls and bears.

Jake: Mm-hmm. So, what are you saying? Go long as you can right now or stay out? What’s the play?

Tobias: Well, I don’t know, I don’t know.

Jake: [laughs]

Tobias: We’re down 22%, median’s 38%.

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