Almost every investor fears that one big bear market that will wipe out their investment; that one massive downturn that will spell “game over” for anyone who has equities exposure. Some of us remember the 2008 financial crisis, the one where the markets lost 58%. To make up for that loss, the markets would have had to gain 138% to break even.

Hence, many investors stay glued to financial news and media, ready to take any defensive measure they can to hedge the bear. And over the last 50 years, do you know what might have happened to every investor who didn’t defend themselves against the bear? They probably made higher returns than those who did.

We’re not saying that you should or shouldn’t sell during a long-term decline. What we are saying is that based on past market data, it might not have mattered all that much. In other words, those who stayed put not only caught every bear, they also caught every bull.

S&P Bulls Have Been More Powerful Than Every Bear Since 1926

Consider this: since 1926, the S&P 500 has seen eleven bear markets. Some of those bears have have exhibited exceedingly steep and long declines (such as the one we saw between 2007 and 2009).

But the averages paint a different picture:

The Average Bear: the average bear market is around 16 months; rarely do bears exceed 18 months. If you hold through a bear, your average unrealized loss in value might have been -34% (remember, this is an average figure; it could have been less or more).

The Average Bull: In stark contrast, the average bull market lasts 57 months. And the average cumulative return would have been greater than 140%.

Now make the comparison:


  • 16 months (bear) vs 57 months (bull); and
  • -34% (bear) vs +140% (bull).


If this were not the case, the U.S. equities markets would not have been able to reach progressively higher levels!

But the important lesson here is that for every investor that rode-out the bear markets without taking any protective measures, they might have done much better than those who defensively sold, only to miss a significant portion of the initial bull run that inevitably occurs after every bear market.

So can a bear market really wipe out your investment? In terms of US equities, that has been far from the case. And there’s no compelling reason, based on the overall US economic environment, that such a thing will happen anytime soon.


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