EuroCalc

What is Bear Market?

A bear market is a period during which broad stock prices fall at least 20% from a prior peak, typically lasting several months to a few years and accompanied by economic recession, weak corporate earnings and broad pessimism.

Since 1928 the US S&P 500 has seen roughly 14 bear markets, averaging a 35% drop over 1.4 years before recovery. The Great Depression (–86%, 1929–32) and 2007–09 (–57%) were the deepest of the modern era. Swiss SPI fell 53% in 2007–09 and 35% in 2000–03.

The cause of a bear market is almost always a combination of stretched valuations, central-bank tightening and an exogenous shock — pandemic in 2020, sub-prime in 2007, dot-com burst in 2000, Volcker rate hikes in 1981. The bottom is typically marked by panic selling, narrow market breadth and capitulation by long-term holders.

Selling during a bear market is the single most expensive mistake retail investors make. Of the S&P 500's best 10 days in any given decade, 7 typically occur within two weeks of the worst 10 days. Missing those bounces converts a small mistake into a catastrophic one. The right response is to keep contributing, rebalance into equities, and shorten the news cycle.

Example

An investor with CHF 200,000 in a global equity ETF sees the portfolio fall to CHF 130,000 in a 35% bear market. If she sells and waits for the all-clear, she typically re-enters 25% higher than the bottom, locking in losses. If she keeps contributing CHF 1,000/month, the recovery delivers roughly CHF 280,000 within four years.

Related terms

Frequently asked questions

How long do bear markets last?+

Average 1.4 years from peak to trough, plus a recovery time that varies from months to four years.

Should I sell when a bear market starts?+

Almost certainly not — missing the recovery bounce typically costs more than the additional drawdown.

What should I buy in a bear market?+

Keep buying the same diversified index funds; the lower prices improve future expected returns.