A History Of U.S. Bear Markets, 1957 to 2022

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During the first 10 months of 2022, the U.S stock market was mired in a painful bear market. The post-Covid-19 supply chain crisis fueled runaway inflation, and the Federal Reserve hiked interest rates seven times that year in a campaign to get prices under control.

While the S&P 500 declined as much as 25% from its prior high-water mark, history shows that the 2022 bear market was actually milder than typical bear markets that have occurred since 1929.

Bear markets can be unpredictable, but within months of their end, they are inevitably followed by a new bull market. Savvy investors study the history of bear markets to learn what to expect and how to prepare to navigate them successfully.

What Is a Bear Market?

A bear market is a period of time during which the stock market—typically represented by the S&P 500—declines 20% or more from its last all-time high.

That’s the widely accepted definition among investors, strategists, economists and others, although there is no official definition of the term. Some experts call a market pullback of just 19% or even less a bear market.

There have been 12 bear markets since the S&P 500 index launched in 1957, including the 1990 bear market, when the benchmark index fell 19.9%. That works out to roughly one bear market every 5.5 years.

Yet despite these regular setbacks, the S&P’s total return since 1957 is more than 65,000%.

Bull markets are the flip side of the coin. A bull market is an extended period of time during which the stock market rallies more than 20% from a low-water mark. Like bear markets, there is no official definition of a bull market.

Many different factors contribute to bear markets. Recessions, macroeconomic weakness, deteriorating investor sentiment and geopolitical events like wars or elections are the main causes of bear markets.


Is the 2022 Bear Market Over?

The 2022 bear market officially ended in October 2022, when the S&P 500 hit its low point of the year.

“Last year’s bear market looked relatively average,” says LPL Financial chief equity strategist Jeffrey Buchbinder. “Without a recession, the average duration of a bear market has been seven months, with a peak-to-trough drawdown averaging -23%.”

For context, the 2022 bear market lasted 10 months, and the S&P 500’s maximum decline from its high point was 25%.

Now that the stock market has transitioned back to a bull market, LPL Financial chief technical strategist Adam Turnquist says history suggests the S&P 500 could soon break out to new all-time highs.

“Of course, we don’t know when the next bear market will arrive, but based on history, there is a good chance it doesn’t show up for quite a while,” Turnquist says. “Since 1957, the average S&P 500 bull market has lasted 59.2 months and produced an average cumulative gain of 169.3% (annualized 28.7%).”

It can be scary to buy stocks during bear markets when prices seem to keep falling. But history shows that bear market buyers have been handsomely rewarded for their boldness over the long term.


S&P 500 Bear Markets 1956 to 2022

The Bear Market of 1956-1957: The Eisenhower Recession

Bear Market Duration: 14 months
S&P 500 Decline: -22%
Time to New Bull Market: 11 months

The 1956-1957 recession was triggered by uncertainties in the outlook for corporate profits and a concurrent sharp rise in bond yields. Corporate profit growth stagnated in early 1956 and began to drop in the first two quarters of 1957.

Economic conditions were worsened by a large influenza outbreak in early 1957, and the Federal Reserve applied additional pressure to the economy by raising interest rates to combat inflation.

The U.S. economy experienced a brief recession known as the Eisenhower Recession, but President Dwight D. Eisenhower jump-started the economy back to growth by implementing fiscal stimulus measures in 1958.

The Bear Market of 1961-1962: The Kennedy Slide

Bear Market Duration: 6 months
Maximum S&P 500 Decline: 28%
Time to New Bull Market: 14 months

In the early 1960s, the U.S. auto industry that had been centered in Detroit, Mich., became more globalized, and domestic auto sales and production began to decline.

In 1960 and 1961, U.S. gross domestic product dropped 2.4% and unemployment approached 7%. A stock market sell-off in early 1962 was so volatile the bear market was nicknamed the “Flash Crash of 1962” and the “Kennedy Slide” after President John F. Kennedy.

Experts blamed investor complacency for the flash crash after stock prices had gained 27% in 1961.


The Bear Market of 1966: The Great Society

Bear Market Duration: 8 months
Maximum S&P 500 Decline: 22%
Time to New Bull Market: 7 months

In 1966, the Vietnam War was escalating, interest rates were rapidly rising, Americans were struggling with inflation and investors were concerned about the possibility of a global recession. In addition to government outlays for the Southeast Asian war, funding for social programs of President Jyndon Johnson’s Great Society also had ramped up government spending.

The S&P 500 hit new all-time highs in January and March of 1966, but didn’t make a new all-time high again until early 1968. The 1966 bear market was difficult for investors, but the U.S. economy avoided slipping into a recession and the market was reportedly not a major factor in the 1966 midterm elections.


The Bear Market of 1968-1970: Vietnam and Inflation

Bear Market Duration: 17 months
Maximum S&P 500 Decline: 36%
Time to New Bull Market: 21 months

The bear market that began in December 1968 was associated with further ramping up of U.S. military spending tied to Vietnam.

While prices remained relatively stable throughout most of the early 1960s, the Federal Reserve reported that inflation jumped to 5% in 1969 from 1.7% in 1965. That marked the worst sustained period of U.S. inflation since World War II.

As a result, the effective federal funds rate rocketed up to 9.1% by August 1969 from 3.9% in August 1967. That sent stock prices tumbling.


The Bear Market of 1973-1974: The Oil Shock

Bear Market Duration: 21 months
Maximum S&P 500 Decline: 48%
Time to New Bull Market: 69 months

The bear market that began in January 1973 was associated with what became known as the oil shock recession. Later that year, Arab oil producing nations instituted an oil embargo on the U.S. in retaliation for its support of Israel in the conflict known as the Yom Kippur War. The embargo triggered a shortage of oil and a spike in oil prices that crippled the U.S. economy.

It was the most severe bear market the S&P 500 Index suffered in the 20th century until then. Stock prices dropped nearly 50% from peak to trough, and it took the S&P 500 nearly six years to reach new all-time highs after hitting its bottom.


The Bear Market of 1980-1982: Double-Dip Recession

Bear Market Duration: 21 months
Maximum S&P 500 Decline: 27%
Time to New Bull Market: 3 months

Despite ongoing inflation and rising interest rates, the S&P 500 performed relatively well in 1979, gaining about 12.3% for the year. However, inflation reached a staggering 15% in 1980. Elevated energy prices dampened economic growth.

The Fed took extreme measures to fight inflation in the early 1980s, raising interest rates as high as 19% in 1981. The U.S. economy experienced a double-dip recession in 1980 and 1981. Fortunately, the S&P 500 took just three months to fully recover from the associated bear market.


The Bear Market of 1987: Black Monday

Bear Market Duration: 4 months
Maximum S&P 500 Decline: 34%
Time to New Bull Market: 20 months

The Fed describes the stock market crash of October 19, 1987, as the “first contemporary global financial crisis.”

On so-called “Black Monday” in 1987, the Dow Jones Industrial Average—another widely followed benchmark for the broad U.S. stock market—dropped more than 22%, its largest single-day percentage drop in history. While there was no direct cause for the crash, Black Monday came after the market had already fallen sharply over several days.


The Bear Market of 1990: The Gulf War

Bear Market Duration: 3 months
Maximum S&P 500 Decline: 20%
Time to New Bull Market: 4 months

The bear market that began in July 1990 was associated with the Gulf War and an accompanying recession. The war was a response by a U.S.-led coalition to free Kuwait from Iraq, which had invaded it. The war sent oil prices soaring once again, forcing the Fed to raise interest rates to keep inflation in check.

Concerns over the war coupled with a weak residential mortgage market triggered a mild U.S. recession. Many U.S. savings and loan institutions had collapsed in the years leading up to the 1990 recession, leading to even tighter credit conditions.


The Bear Market of 2000-2002: Dot Com Bubble

Bear Market Duration: 31 months
Maximum S&P 500 Decline: 49%
Time to New Bull Market: 56 months

The bear market that began in March 2000 was triggered by the bursting of the Dot-Com bubble.

Fed Chairman Alan Greenspan famously mocked excess enthusiasm for tech stocks as “irrational exuberance.” But investors stayed bullish amid historically low interest rates and prolonged stock market gains throughout the 1990s. In the late 1990s, tech stock valuations soared to unsustainable highs.

When the Fed began raising interest rates in 1999 and 2000, tech stocks simply couldn’t maintain their bubble valuations. After 2000, the S&P 500 took more than four and a half years to recover to new all-time highs. The tech-heavy Nasdaq took an incredible 15 years to fully recover from the post-bubble bear market.


The Bear Market of 2007-2009: Global Financial Crisis

Bear Market Duration: 17 months
Maximum S&P 500 Decline: 56%
Time to New Bull Market: 49 months

The bear market that began in October 2007 is the most severe bear market in the history of the S&P 500. It emerged from the bursting of the subprime mortgage bubble and the global financial crisis.

In the years leading up to the crisis, financial institutions had overleveraged their balance sheets with complex securities made up of bad mortgage loans. Investors looked on helplessly as major investment banks Bear Stears and Lehman Brothers collapsed. That sparked fears about the stability of the entire global financial system. The S&P 500 dropped 56% during the resulting bear market.


The Bear Market of 2020: Covid-19 Pandemic

Bear Market Duration: 1 months
Maximum S&P 500 Decline: 34%
Time to New Bull Market: 5 months

The bear market of 2020 was associated with the Covid-19 pandemic and associated U.S. recession. The recession was unique in that it was artificially created by mandated government business shutdowns.

Stock prices crashed in February and March 2020 over concerns about the deadly outbreak. But the market quickly recovered to new all-time highs just five months later after it became clear the Covid-19 outbreak wasn’t as catastrophic or deadly as initially feared. Stock prices were also supported by more than $5.2 trillion in U.S. government stimulus.


The Bear Market of 2022: Post-Pandemic Supply Chain Crisis

Bear Market Duration: 10 months
Maximum S&P 500 Decline: 25%
Time to New Bull Market: 8 months

Unprecedented Covid-19 stimulus measures, global pandemic supply chain disruptions and Russia’s invasion of Ukraine sent U.S. inflation to its highest level in decades in 2022. The Fed was forced to aggressively raise interest rates, which triggered a sell-off in growth stocks and tech stocks.

Fortunately, the labor market has remained resilient, and concerns the Fed would trigger a “hard landing” recession have proven unwarranted so far. In fact, inflation has been trending steadily lower since the S&P 500 bottomed in October 2022.

Bear Market Close Calls

Market watchers generally include 1990’s setback among the modern full-fledged bear markets. The 19.9% plunge by the S&P 500 rounds off to 20%.

It was more severe than many other bear markets in terms of how much of the prior bull market it wiped out, says Sam Stovall, Chief Investment Strategist of CFRA Research.

Additional post-1957 market pullbacks came close to achieving bear market status but fell short. Many investors lump them in with conventional bear markets anyway.

Late 1970s Stagflation Period

Downturn Duration: 17 months
Maximum S&P 500 Decline: 19%
Time to New Bull Market: 17 months

The market downturn that began in September 1976 was not nearly as severe as the oil shock recession and bear market just a few years earlier. But it was painful nonetheless.

There was no U.S. recession associated with the bear market of the late 1970s. Yet the U.S. economy was still dealing with stagflation—a period in which inflation is historically high and economic growth stagnates. In 1979, prices for West Texas Intermediate (WTI) crude oil reached new all-time highs, approaching $150 per barrel in 2023 dollars.


The 1998 Asian Currency Crisis

Downturn Duration: 1 month
Maximum S&P 500 Decline: 19%
Time to New Bull Market: 3 months

Investors generally think of the 1990s as one of the biggest and most prolonged bull markets of all time. The late 1990s were a particularly strong period of growth for tech stocks. But the period became known as the Dot-Com bubble due to its sudden demise.

The market run-up before the bubble burst was not, however, uninterrupted. Several Asian countries experienced financial crises in late 1997. In 1998, the S&P 500 hiccuped. Many investors have forgotten that brief 19% pullback. Around the same time, Russia was forced to deval‎ue its currency.

The global currency volatility triggered a sharp one-month pullback by the S&P 500 that was quickly forgotten after the index bounced back and hit new all-time highs just three months later.

The 2011 European Debt Crisis

Downturn Duration: 6 months
Maximum S&P 500 Decline: 19%
Time to New Bull Market: 4 months

The market tumble of 2011 began with a sovereign debt crisis in Europe. Standard & Poors also issued its first U.S. credit downgrade in history following a political dispute in Congress about the U.S. debt ceiling.

Fortunately, lawmakers eventually reached a deal on the debt ceiling, and Europe ultimately approved bailout packages for Greece, Ireland, Portugal, Spain and Cyprus.


The 2018 Fed Rate Hikes

Downturn Duration: 3 months
Maximum S&P 500 Decline: 19.8%
Time to New Bull Market: 4 months

The market fell 19.8% in 2018. Like the 2011 and 1998 pullbacks, it was a brief, shallow downturn triggered by concerns that a U.S. recession could be imminent.

Investors believed the Fed was raising interest rates more rapidly than the economy could digest, and experts saw slowdowns in the auto markets and housing markets as red flags for the economic outlook. Fortunately, the economy avoided a recession and this mini bear market lasted just three months.

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Sources: https://www.forbes.com/advisor/investing/bear-market-history/