Bear Markets and Bull Markets: What Does the Data Show About Frequency and Duration?
2025's complex economic picture took on another dimension over the weekend as the U.S. waded into tensions in the Middle East. Setting aside the important humanitarian and security issues I know we're all concerned about, it's understandable that investors might worry about more disruption to their financial plans, especially if they're retired.
The good news, from this very narrow perspective, is that the markets have responded well to the potential ceasefire between Israel and Iran. But issues around war, as well as the supply, demand, and production of oil, are always factors that could make Wall Street jittery. Given that we're also still staring down potential tariffs against China, uncertain inflation and interest rates, and deep political divisions at home, should folks be preparing for a bear market?
The short answer is yes, because investors should always be prepared to manage the inevitable peaks and valleys of the markets. But rather than making predictions right now, I think it might be helpful to break down the differences between bear and bull markets. A little extra perspective might give you some added peace of mind as you think about your financial planning.
To set the stage, when I entered the financial services industry in the early 90’s the Dow Jones Industrial Average was around 3,000. Today it sits at 43,000. The wealth-building opportunities in the capital markets can be very powerful over time if understood accurately. Although, it’s important to note that the returns do not come in a straight line.
Bear Markets: Brief Hibernation
A key number to watch for when evaluating the current strength of the market is 20%.
If a stock index (such as the Dow Jones or S&P 500) closes 20% lower than its previous high, then that index has dipped into bear territory. Smaller drops of 10%-19.9% are considered corrections.
Conversely, if that index closes 20% above its previous low, then we're back in a bull market.
Here are some other key facts about bear markets:
They're not unusual. The S&P 500 Index has experienced 27 bear markets since 1928. In that same span, the number of bull markets is ... 27! On average, the markets dip into bear territory every 3.5 years.
Significant losses don't last very long. Historically, bear markets average around 289 days, or about 9.6 months. During that span, stocks usually temporarily decline by around 35% of their value. That's not nothing, but it's manageable with the tools of a balanced, diversified portfolio.
It's not all bad news. There can be significant opportunities for investors during down markets, such as "buying low" on depreciated stocks, initiating a strategic rebalance among asset classes, using tax-loss harvesting to lower your tax liability for the year, or making tax-efficient Roth IRA conversions.
The economy is bigger than one number. Many folks equate "bear market" with "recession." But it's possible for the Dow to have a bad month while the economy is adding jobs, new houses are being built, and consumer confidence is holding steady. The team at Keen Wealth takes in every available data point when assessing the health of the economy and the best possible strategies for our clients.
Bull Markets: Taking the Market by the Horns
When you're in the middle of a correction or bear market, watching your accounts trend in the wrong direction, and listening to the talking heads on cable news predict the end of the world, it's easy to panic. Try to remember that, compared to a bear market:
Bull markets last longer. The average length of a bull market is 992 days (2.7 years).
Bull markets move bigger numbers. During those 2.7 years, bull markets have gained 115% on average. So, market history suggests that if you can learn to tolerate bear markets, the declines should be temporary.
Bull markets stampede out of the gate. Historically, the first half of a bull market outperforms the second half 74% of the time. Investors who panic during bear markets and try to "get out until the markets are good again" are almost guaranteed to miss out on market growth and lock in what could have only been temporary short-term declines.
Bull markets are never the same. The longest bull market lasted for more than 12 years (1987-2000) and gained 582%. The shortest, in June 1931, lasted 25 days and gained 27%. Instead of waiting for a big bull market and hoping for a jackpot, disciplined investors use comprehensive financial planning to make the most of their resources through every advantageous market move.
Bulls, Bears, and You
There’s no magic trick to managing the normal ups and downs of market investing. The vast majority of ordinary investors who are able to build wealth and reach their financial goals have confidence in their financial plan and the discipline to follow it. Helping folks build those essential financial skills, and a plan that you can trust, is at the heart of The Keen Wealth Advantage.
For a more in-depth analysis of where the economy could be headed, join our mailing list and we’ll let you know when our President and CIO, Matt Wilson is ready to deliver his 2025 Q3 Market Update in July.
Sources: Hartford Funds Management Group, Inc. - Bull Markets & Hartford Funds Management Group, Inc. – Bear Markets
About Bill
Bill Keen is a financial advisor with over 30 years of industry experience. As the founder and CEO of Keen Wealth Advisors, a registered investment advisory firm, he focuses on providing personalized retirement planning designed to help people thrive before and during their retirement years. With a passion for educating others, Bill regularly blogs about retirement planning, hosts the podcast Keen on Retirement, and has contributed to Forbes, U.S. News and World Report, Reuters, Wall Street Journal’s Market Watch, Yahoo Finance, and other publications. Based in Overland Park, Kansas, Bill and his team work with clients throughout the greater Kansas City area and across the nation. To learn more, connect with him on LinkedIn or visit www.keenwealthadvisors.com.
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