A visual history of U.S. bull and bear markets since 1926

A visual history of U.S. bull and bear markets since 1926

Who am I kidding?

I can't go an entire month without publishing anything here at Get Rich Slowly. I need to write. And judging from the feedback regarding my planned sabbatical, you folks want me to write! Tell you what, let's change the premise.

Instead of taking all of September off from publishing, I'll instead vow that for the next four weeks, I won't tackle any major articles. If there's something that I want to share and that thing can be shared in 20-30 minutes, I'll do it. This plan will serve the same objective — freeing my mind to focus on the other tasks that need to get done around here — while also giving me an outlet for my writing (and giving you something to read).

Sound like a plan?

Instead of a “silent September”, we'll have a “subdued September” here at Get Rich Slowly. Now and then, I'll share some quick and interesting money stories.

A History of U.S. Bull and Bear Markets

Here, for instance, is a chart providing a succinct history of the U.S. bull and bear markets since 1926. (Click to open a larger version.)

A history of U.S. bull and bear markets

I love this chart! Produced by First Trust Portfolios (and using market data from Morningstar), it mirrors a similar chart from 2014.

This chart is unique because instead of showing stock market growth as an unconnected line, it deliberately resets each individual bull and bear market to a baseline. Bear markets are shown in red. (Or is that orange?) Bull markets are shown in blue. They're plotted on a logarithmic scale.

A “bull market” here is defined as running “from the lowest close reached after the market has fallen 20% or more, to the next market high. Similarly, a “bear market” runs “from when the index closes at least 20% down from its previous high, through the lowest close after it has fallen 20% or more”. That's a little confusing, I know, but if you look at the chart for a few minutes, it should make sense.

According to First Trust Portfolios:

  • The average bull market period lasted 9.1 years with an average cumulative return of 476%.
  • The average bear market period lasted 1.4 years with an average cumulative loss of -41%.

This chart makes it easy to visualize just how costly it can be to get gun shy after a market crash. If you stop investing — or worse, pull your money out! — you can miss out on huge growth.

The chart also clearly demonstrates that the U.S. stock market has been growing steadily for the past 90+ years with only occasional (relatively minor) speed bumps. If you let your investing policy be dominated by potential drops, you run a real risk of missing out on future gains.

(And honestly? As much as I'm against market timing, I wouldn't condemn anyone who looked at this chart and thought, “Hm. It looks like we're near the end of a bull market. Maybe I should cash out for a couple of years.” I don't plan to do that, but I agree it seems like we're nearing the end of this cycle.)

More about...Investing, Economics

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Maria
Maria
2 years ago

This is a great graphic! And while it shows that there have been several smaller bear markets (i.e., the end could be any day now!), it’s also impressive how many have extended that much higher than our current one–especially when the logrithmic scale is considered. One thing is for sure: it’s a roller coaster. Hang on! 🙂

Steve
Steve
2 years ago

That’s pretty incredible to see that we aren’t even close to hitting the type of bull runs that have happened in the past from a percentage standpoint. Here’s to hoping it just keeps going!

Ian
Ian
2 years ago

What I find interesting is that there have been recessions without bear markets and bear markets without recessions. In my mind they were always linked.

FiddleFaddle
FiddleFaddle
2 years ago

This is a great visualization and I’m glad you’ll be writing some short articles this month!

Coopersmith
Coopersmith
2 years ago

This is the reason to have save money in a safe place for when the bear market comes IF YOU REALLY NEED IT. You don’t want to buy high and have to sell low if you need the money. Granted all other recessions bounced back quicker that the Great Recession but once again you point out that selling at the low is the wrong thing to do as to miss out gains.

Arianne St.Claire
Arianne St.Claire
2 years ago

That’s a pretty informative graphic, thank you so much for sharing. I want to believe that we are now in the early stages of a bear market after that long bull run. While big institutions use bear markets to buy stocks, keep in mind that they do it for the long haul. But this taught me one thing, and that is to invest as though every market is a bear market, because that is when you can grow substantial and sustainable wealth. Just my two cents.

Mr. Pop
Mr. Pop
2 years ago

Interesting chart-never seen the data expressed like that. We’ve been hearing that the current bull market is the longest in history, but it looks like these guys are measuring it differently?

Ron Cameron
Ron Cameron
2 years ago

I love these sorts of graphs. The bulls (ultimately) always win! I’d be careful about the mentality of “it’s time for a correction, time to cash out some”. Market timing/trading is the #1 reason for poor performance in people’s portfolios. Dalbar puts out a great report on this every year: https://www.qidllc.com/wp-content/uploads/2016/02/2016-Dalbar-QAIB-Report.pdf We are our own worse enemy! On a “Subdued September” note: J.D., in an effort to get some time off do you ever write a bunch of articles to post later in time? I always figured you had a bucket full somewhere that you just add to and pull… Read more »

dh
dh
2 years ago
Reply to  Ron Cameron

Great point, Ron. Really the attitude should be –“it’s time for a correction, time to BUY in some,” especially if a person has a big-ass chunk of cash just sitting around in their checking account or whatever doing nothing for them. Like if JD and Mr. Money Mustache are right with their predictions, then the market is about to go on sale!! When the market goes on sale, then maybe it’s not such a bad idea to do a little timing and put in a few hundred thousand all at once, if a person has that laying around. I mean,… Read more »

Dan Murray
Dan Murray
1 year ago
Reply to  dh

I invested a bunch of savings that was sitting on the sidelines. Purchases made starting 12/25/2019 to 1/25/2019. All high dividend yield stocks with the exception of Apple which I was able to nab for under $153/share. It is possible to time the market…but not predictively. You can “observe” and decide how to put money to work if you have a target list of buys you’d like to make at specific price levels. All the other buys were at relatively high dividend yields base on the last 12-24 months.

Joe
Joe
2 years ago

I like the graph. It’s really neat. It looks like the current bull market isn’t that long after all. I guess it could run for a few more years. Who knows?
Why do I keep hearing this is the 2nd longest bull market?

Ibrahim Zaghw
Ibrahim Zaghw
2 years ago

I think that a big reason people tend to be gun shy after a market crash is that even though the graph clearly shows that the gains are far greater than the losses, the fact remains that a 50% loss can wipe out a 100% gain made earlier. In other words, loss percentages must always be significantly less than gain percentages, and they can never reach 100%: a 100% loss means that the entire portfolio is lost. So, the 83% loss in 1929 was sufficient to take out earlier profits of up to 500%!! That being said, the overall trend… Read more »

Roman
Roman
2 years ago
Reply to  Ibrahim Zaghw

True. Another reason for the behavior is “recency bias”. We all suffer from it in varying degrees – it’s the tendency to project the recent events as indicative of what’s to come in the future because it’s fresh in our minds. Nobody in March 2009 could’ve predicted that that would be the beginning of the longest bull market. I certainly didn’t – heck, my greatest achievements in 2008-09 period is that I didn’t sell anything, which I accomplished by simply refusing to login to my accounts to avoid getting depressed. When I see recent FIRE blogs, I note that most… Read more »

James Heidebrecht
James Heidebrecht
2 years ago

This is a fantastic visual, thanks for putting this up! It’s interesting to note that 2 of the last 3 bull markets lasted for almost 13 years. We may still have a ways to go with this one. Going to share this.

Mysticaltyger
Mysticaltyger
2 years ago

The thing about “cashing out for a couple of years” is it doesn’t have to be an all-or-nothing proposition. I think it’s smarter to steadily move a modest amount of money over to cash and bonds…like a percentage point or two per year, maybe even take 5 percentage points worth off the table…but making big moves in either direction is a bad idea.

David
David
2 years ago

Maybe I don’t understand the methodology but the Great Depression is widely believed to have lasted roughly ten years. This chart shows it lasting 2.8 years. What am I missing in this depiction?

Carl R
Carl R
1 year ago

This is a misleading graph in that it doesn’t account for inflation. One would look at this graph and think that people made quite a profit between 1966 and 1982, but real returns were actually negative during that period. If I recall correctly, an investor that remained in the market during that entire period lost about 70% of his wealth, when you account for inflation.

Dan Murray
Dan Murray
1 year ago

I do data visualization work for a living. The graphic is well done. My only nitpick would be their failure to reference FRED data (the St Louis Federal Reserve) for the recession bars. You can download the recession data on many websites, but the FRED site is the best. Paste this in your browser:
https://alfred.stlouisfed.org/series?seid=USREC

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