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The S&P 500 has exited the longest bear market since 1948. What should investors expect next? Thumbnail

The S&P 500 has exited the longest bear market since 1948. What should investors expect next?

How To Invest Markets & Economy

Last week, the S&P 500 officially exited the longest bear market in 75 years.

What does this mean for investors? Does the end of a long bear market signal the start of a strong bull market?

Not necessarily. Investor experiences following these declines have been anything but uniform in the past. Though stock market ups and downs are unpredictable, zooming out and looking at nearly a century of bull and bear markets shows that the good times generally outstay and outweigh the bad times (Exhibit 1).

Exhibit 1: S&P 500 Index Total Returns

January 1926 –December 2021

Past performance is no guarantee of future results. Indices are not available for direct investment; therefore, their performance does not reflect the expenses associated with the management of an actual portfolio.
In USD. The chart end date is December 31, 2021; the last trough-to-peak return of 119% represents the return through December 2021. Due to availability of data, monthly returns are used January 1926 through December 1989; daily returns are used January 1990 through present. Periods in which the cumulative return from peak is –20% or lower and a recovery of 20% from trough has not yet occurred are considered bear markets. Bull markets are subsequent rises following the bear market trough through the next recovery of at least 20%. The chart shows bear markets and bull markets, the number of months they lasted, and the associated cumulative performance for each market period. Results for different time periods could differ from the results shown. A logarithmic scale is a nonlinear scale in which the numbers shown are a set distance along the axis and the increments are a power, or logarithm, of a base number. This allows data over a wide range of values to be displayed in a condensed way. Source: S&P data © 2022 S&P Dow Jones Indices LLC, a division of S&P Global. All rights reserved.

The end of a long bear market is a good opportunity to remind investors that history supports an expectation of positive returns over the long term. Sticking with your plan and remaining in the market helps put you in the best position to capture the recovery following market downturns.


Dimensional Fund Advisors