The BULLS and the BEARS

I just came across the attached ‘The History of U. S. Bear and Bull Markets Since 1926” prepared by First Trust Portfolios L.P. this year. The graphical presentations display the durations, total returns and average annual returns, for the eight Bear markets and the nine Bull markets from 1926 to 2016. We thought it was interesting and wanted our clients to be aware of the historical significance of these market fluctuations. These are some of the observations we take away from the data:

  1. The Bull markets last longer than Bear markets – – nine years for the average Bull market and less than two years for the average Bear market correction. The longest duration for a Bear market, other than the Great Depression, is 2.1 years when the Tech Bubble burst in 1999. Even the most recent and painful correction/recession lasted only 1.3 years.
  2. The rate of total growth in Bull markets is much greater than the percentage of total loss in Bear markets – average total gain during Bull markets is 468% while Bear markets average loss for the duration of the correction is just 41%. Even if you remove the greatest and the least total Bull market gains 845.2% and 75.6%, (the two results that would disproportionately skew the average), then the seven remaining total return percentages average 470.7%.
  3. During the last ninety years there have been 15 recessions but, only nine Bear markets – six recessions occurred in Bull markets.
  4. Our current Bull market of 8.1 years is not the longest – four have actually lasted longer, and each of these four longer Bull markets had significantly more total gain than we have experienced so far. In fact all of the other four periods had total gains greater than 815%.
  5. Growth in Bull markets is not a straight line. Look at all the dips, some may have been related to a recession, but all were so brief as to not interrupt the momentum of the Bull market.

I hasten to point out that there is no signal, or starter’s gun to sound the beginning or end of either market cycle. All of the data was compiled by looking in the rear view mirror. That is why we believe in and practice allocation and diversification; for there may be Bear market in one sector while there is a Bull market in a different sector.

Kayla, Mike and I invite your questions and/or responses.