My Account
Volatility

Bouncing Back From Market Declines

11/07/2022
Perpetual motion desk decoration.

You know that the stock market swings between highs and lows for many reasons. But big moves down can be unsettling.

Some events or factors can lead to declines of 10% or more, known as market corrections. Then there are bear markets, which are declines of 20% or more and usually last longer than corrections.

Corrections are generally shorter-lived declines between 10% and 20%, while Bear Markets are declines of 20% or more and can last longer, even years.

Looking at past market declines—understanding why they started, how often they occurred and what happened after—can help you make more informed investment decisions during turbulent times.

How Long Do Corrections and Bear Markets Last?

Corrections are normal, even if they don’t always feel that way. On average, corrections have happened about every two years and lasted a few months. However, they can take place more or less frequently.

Over the past 75 years, bear markets have occurred roughly every five years and lasted 10 months on average.

Market Corrections Have Happened About Every 2 Years

Market Corrections Happened Every 2 Years on Average.

Data from 1/1/1946 to 8/31/2022.
Source: FactSet and American Century Investments. Past performance is no guarantee of future results.

Why Markets Decline

Corrections can occur when an asset or an entire market’s prices are overinflated. Many investment professionals assume corrections will happen periodically and believe they are necessary to return stock values back to “normal.”

Reasons for bear markets may be less expected. For example, emotions surrounding economic or political events can influence a market sell-off. While no one can accurately predict when bear markets occur, history tells us that markets do rebound.

What Happens After Market Declines?

Bear markets may seem drastic, but in many cases, the recoveries have been dramatic.

History shows that markets have recovered after periods of declines—and even rewarded those who remained invested.

Bear Market Recoveries Through History

Summary of Data

During the Downturn:

11.6 Months Average Length of Bear Markets

-31.4% Average Decline During Bear Markets

In the Recovery:

37.1% 1 Year Later

92.6% 5 Years Later

182.0% 10 Years Later

Post-Downturn Cumulative Returns



All the Details

Bear Markets Through History, Their Recoveries and ...

The table above shows all of the bear markets since 1928, as defined by Standard & Poor’s using the S&P 500® Index. The returns are price returns only, not total returns, and thus do not include dividends. Past performance is no guarantee of future results. Thus, the table should not be taken as an implication of future returns. Rather, it should serve as a reminder of the past resiliency of U.S. financial markets.

Sources: Standard & Poor’s; American Century Investments.

Tips for Getting Through Market Declines

Although watching markets decline can be nerve-racking, we believe keeping your money invested longer will give you the best opportunity to reach your long-term goals. As shown below, trying to time when to buy and sell investments can lower your returns substantially.

Jumping In and Out of Stocks May Cost You

Impact of Missing a Few Days of a Market Rally

Jumping In and Out of Stocks May Cost You.

Source: FactSet. Growth of $10,000 in the S&P 500® Index. Data from 01/01/1999 – 09/30/2022. The index does not reflect fees, brokerage commissions, taxes or other expenses of investment. Investors cannot invest directly in an index. Past performance is no guarantee of future results.

This hypothetical situation contains assumptions that are intended for illustrative purposes only and are not representative of the performance of any security. There is no assurance similar results can be achieved, and this information should not be relied upon as a specific recommendation to buy or sell securities.

Bond Values Have Improved When Held Longer

Percentage of Time Bonds Increased in Value Over Each Time Period

Bond Values Have Improved When Held Longer

A buy-and-hold strategy with bonds may be beneficial. Bonds are represented by the Bloomberg U.S. Aggregate Bond Index.

Source: Ibbotson Associates. Data from 01/31/1976 – 09/30/2022. Past performance is no guarantee of future results.

The indices do not reflect fees, brokerage commissions, taxes or other expenses of investment. Investors cannot invest directly in an index.

This hypothetical situation contains assumptions that are intended for illustrative purposes only and are not representative of the performance of any security. There is no assurance similar results can be achieved, and this information should not be relied upon as a specific recommendation to buy or sell securities.

You Don’t Need to Go It Alone

Regular monitoring of your portfolio’s investment mix is essential when investing in bull and bear markets. For those close to retirement or other major financial goals, it may be a good time to reevaluate your portfolio’s level of risk. A financial professional can help you figure out if your investments are aligned with your goals.

Learn more do's and don'ts for volatile markets.

Explore More Insights

Investment return and principal value of security investments will fluctuate. The value at the time of redemption may be more or less than the original cost. Past performance is no guarantee of future results.

This material has been prepared for educational purposes only. It is not intended to provide, and should not be relied upon for, investment, accounting, legal or tax advice.

©2024 Standard & Poor's Financial Services LLC. All rights reserved. For intended recipient only. No further distribution and/or reproduction permitted. Standard & Poor's Financial Services LLC ("S&P") does not guarantee the accuracy, adequacy, completeness or availability of any data or information contained herein and is not responsible for any errors or omissions or for the results obtained from the use of such data or information. S&P GIVES NO EXPRESS OR IMPLIED WARRANTIES, INCLUDING, BUT NOT LIMITED TO, ANY WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE IN CONNECTION TO THE DATA OR INFORMATION INCLUDED HEREIN. In no event shall S&P be liable for any direct, indirect, special or consequential damages in connection with recipient's use of such data or information.