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Stingy Investor Tip Sheet
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| Real Bear Markets |
I took a look at U.S. bear markets, both with and without inflation,
this week. The results are similar with a few interesting
differences. Most importantly, the 1970s were particularly hard hit
by inflation.
Before getting on to the results, I'll talk a bit about the calculations.
I stuck with the S&P500 (and its predecessor indexes) and used monthly
data in my analysis. Further, bear markets are defined somewhat
arbitrarily as those that have declined 20% or more from their prior
peak levels. Nominal return data (without inflation) is used to produce a table of
bear markets and a graph. I then do the same thing with
inflation-adjusted (or real) data.
The bear market table shows nominal returns during
past bear markets, the number of months it took to go from the prior
peak to the bottom, and then the number of additional months it took
for the market to rebound to the prior peak.
Nominal Bear Markets
| Bear markets for the S&P500 based on nominal monthly data |
| Start | End | Peak-Trough Decline | Months to Trough | Months to Recovery |
| Mar-1876 | Feb-1879 | -33.1% | 15 | 20 |
| Sep-1882 | Nov-1885 | -20.8% | 21 | 17 |
| Jan-1893 | Aug-1897 | -25.1% | 4 | 48 |
| Sep-1902 | Nov-1904 | -25.8% | 13 | 13 |
| Sep-1906 | Dec-1908 | -34.0% | 14 | 13 |
| Nov-1916 | May-1919 | -28.0% | 13 | 17 |
| Oct-1919 | Apr-1922 | -22.8% | 22 | 10 |
| Aug-1929 | Jan-1945 | -83.4% | 33 | 151 |
| Nov-1947 | Oct-1949 | -21.8% | 6 | 35 |
| Jun-1962 | Apr-1963 | -22.3% | 6 | 10 |
| Dec-1968 | Jan-1972 | -31.5% | 19 | 19 |
| Jan-1973 | Sep-1976 | -43.3% | 21 | 24 |
| Sep-1987 | Jul-1989 | -30.2% | 3 | 20 |
| Sep-2000 | Mar-2006 | -43.3% | 25 | 42 |
| Oct-2007 | Mar-2009 (?) | -51.0% (?) | 17 (?) | (?) |
| Sources: Robert Schiller, indexfunds.com, S&P/Citigroup, Based on Month End Data |
The following graph shows the S&P500's decline from its prior
peak. The graph might get you down, but it's important to remember
that the S&P500 has moved smartly higher over the entire time period.
(click for larger version)
Real Bear Markets
The following table and graph are similar to the previous ones but this time around inflation-adjusted data is used.
| Bear markets for the S&P500 based on inflation-adjusted monthly data |
| Start | End | Peak-Trough Decline | Months to Trough | Months to Recovery |
| Jun-1876 | Mar-1878 | -28.6% | 12 | 9 |
| May-1892 | Jul-1895 | -23.0% | 14 | 24 |
| Aug-1902 | Jan-1905 | -26.3% | 14 | 15 |
| Sep-1906 | Mar-1909 | -36.8% | 14 | 18 |
| Jun-1911 | Oct-1915 | -20.5% | 42 | 10 |
| Nov-1916 | Aug-1924 | -47.1% | 49 | 44 |
| Aug-1929 | Jan-1937 | -79.0% | 33 | 56 |
| Feb-1937 | Apr-1945 | -50.0% | 13 | 85 |
| May-1946 | Sep-1950 | -37.1% | 21 | 31 |
| Dec-1961 | Apr-1963 | -22.8% | 6 | 10 |
| Nov-1968 | Jan-1983 | -54.2% | 70 | 100 |
| Aug-1987 | Nov-1992 | -30.8% | 3 | 60 |
| Aug-2000 | May-2007 | -45.8% | 25 | 56 |
| Oct-2007 | Mar-2009 (?) | -51.7% (?) | 16 (?) | (?) |
| Sources: Robert Schiller, indexfunds.com, S&P/Citigroup, Based on Month End Data |
(click for larger version)
The inflation-adjusted results reduce the impact of the 1930s bear market
due to deflation. On the other hand, the 1970s bear market is
much worse due to rampant inflation during the period. Indeed, the
real bear market of the 1970s lasted almost as long as the nominal
bear market in the 1930s.
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| | 05/01/2009 7:30 PM EST Permlink save & share | Markets |
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