Where’s the Bear?
We mentioned earlier that the frequency of large losses or bear markets may not be as important as the magnitude of these losses. However, investors can be influenced by the frequency of losses or increased market volatility. After a period of calm, like the one we experienced last year in the equity market, investors may become too complacent about losses or volatility.
The current bull market just turned nine earlier in March, and it’s only been surpassed in length and cumulative return by the 12-year bull market of 1987-2000. While stocks have risen over 300% during this nine-year period, it hasn’t been a completely smooth ride. In this bull market there have been six corrections (market losses of 10% or more), most recently in February when stocks dipped over fears of inflation and higher interest rates.
Corrections occur more frequently than bear markets. Since World War II, stocks have corrected every 2.8 years, according to S&P Dow Jones Indices. Bear markets have occurred more often than many investors may think—every 4.8 years since WWII. (See chart below.)