The Bear Market Lasted Longer Than You Think

If you ask most stock market bears, they'll tell you last year's decline wasn't nearly painful enough...

The S&P 500 Index dropped 25% from peak to trough. And that downturn happened in roughly 10 months.

It was a brutal crash. Still, many bears argue that the decline was far too short to be done with us yet... or that stocks didn't fall far enough.

Well, according to history, they'd be wrong (on the length, at least).

By one measure, the 2022 bear market was one of the longest on record. It lasted even longer than the financial crisis... Heck, it was the second-longest bear market in more than 70 years.

That explains why it felt so painful in real time. But the good news is, the bears are wrong – and the pain is finally over.

Let me explain...

Stocks have been ripping higher in recent months. The surge pushed the S&P 500 more than 20% above last year's low in October... which makes the new boom an official bull market.

But even that "official" definition is questionable. The truth is, as I noted last month, defining a bull or bear market gets murky. Nobody rings a bell at the exact top or bottom of the market. The transitions aren't so obvious in real time.

This gets even trickier when you're trying to tell how long each cycle has lasted.

Normally, we'd measure a bear market's duration from the high to the low. But again, you don't actually know you're in a bear market until stocks have fallen 20%... And you don't know it's over until stocks have risen 20% from their low.

Once those two events happen, we can look back at the time in between... and determine how long the bear market lasted.

This measure is more accurate about how it "feels" to live through a bear market. And based on this definition, we've just emerged from one of the longest downturns in history.

It lasted 248 trading days – almost a full year. You can see it in the chart below...

Now, again, this measure doesn't jive with what the bears would tell you right now. They'd say last year's bear market was historically short. And they're right – if you're using the peak-to-trough decline.

The bear market lasted just 196 trading days based on that measure. That's well below the average bear market duration of 312 trading days. But the peak-to-trough measure misses the real-world experience of not knowing when the bear market began... or when it was over.

The first measure does a much better job of capturing that time. And by this gauge, the bear market spanned 248 trading days – well above the average length of 217 since 1928.

If we start our data in 1950, it gets even more extreme. Since then, the average bear market has lasted just 178 days... which makes the recent bear market nearly 40% longer than normal.

This explains why the recent bust felt so painful. It lasted a long time. Only the dot-com bust was longer, going back to 1948.

But there's good news... That bear market is over.

The trend is in our favor. It's strong enough that stocks have soared more than 20%. No matter how you look at it, we've entered a new bull market.

You might be telling yourself this is a sucker's rally. After the pain of last year, you might think it's safer to stay out of the market. But that's a mistake.

History shows this boom is real. It's time to get off the sidelines and put money to work.

Good investing,

Brett Eversole

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