Economic security

How long with this Bear Market continue?

As everyone knows who has not been living in a cave without electricity or Internet, we are now officially in a “Bear Market” in stocks. This means, in a basic way, that stock prices are off at least 20 percent from their recent highs. I am writing this on Christmas Day and the stock market is closed. It’s entirely possible that we could have a major sell off again very soon.

Now, I am a fairly old man, and I have been following the stock market for a long time. I have seen lots of Bear Markets. They are not unusual and have happened roughly a dozen times in the past fifty years. They tend to last about a year, and then the recovery to where the market was before the Bear Market reached its nadir tends to last very roughly two years.

So we could be waiting a good long while for the market to recover. Some bear markets have lasted for roughly a decade and it has taken several decades to reach pre-crash levels if you factor in inflation and don’t count dividends.

It hurts like a major, endless toothache to be in a Bear Market and is maddening and scary. But they do happen and if you get caught in one, history has proved that the best thing you can do is hold onto your stocks in broadly diversified indexes and not to panic and sell out.

You simply have no idea of when the correction into positive territory will start. History has also shown that a large slice of the gains in stock market rallies are concentrated in a few days of feverish optimism and if you miss them, you miss a lot. So Bear Markets happen, and there’s not much you can do about it.