Ken Roberts’ Market Beat: Historical bear markets
December 30, 2018
The major averages just finished their worst day of trading on Christmas Eve ever.
On Dec. 24, The Dow Jones industrial Average closed down 653.17 points which is a fall of 2.91 percent, the S&P 500 was down 65.52 points or 2.71 percent. A bear market is defined as a drop of at least 20 percent and we are just about there.
The S&P 500 is in bear market territory. It hit an all-time high of 2940.41 on Sept. 21 this year and the fall from then until Christmas Eve has been 589.31 points or 20.04 percent. The Dow Jones Industrial Average posted its all time high of 26,951.81 on Oct. 3 and had dropped 5159.61 points or 19.14 percent as of Christmas Eve.
We've experienced several bear markets since the Great Depression. That bear market started in September 1929 and did not end until June 1932. The S&P 500 fell by 86.1 percent, which was the worst bear market we've seen. The crash of 1929 happened during this one.
The next bear market started in May 1946 and lasted until June 1949, the S&P 500 dropped 29.6 percent at its low point during that bear. The economy went into a post-war recession after World War II.
From December 1961 until June 1962 we had another bear and the S&P 500 dropped 28 percent at its worst. The market was affected by the Cuban Missile Crisis at this time.
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November 1968 to May 1970 we had a recession and concerns about Vietnam that saw a decline of 36.1 percent in the S&P 500.
Another one started in January 1973 and ran until October 1974. The S&P 500 was down 48 percent at its low point. Energy prices were rising dramatically due to the Arab Oil Embargo and the economy slowed down.
We had a bear in the early 1980's that ran from November 1980 until August 1982. Inflation was high, and the Fed raised the Fed funds rate to 20 percent, which led to recession. The S&P 500 was down 27.8 percent during this one.
A short bear ran from August 1987 until December 1987 where the S&P 500 fell by 33.5 percent. The crash of 1987 occurred during this time.
The dot-com bubble burst in March 2000 and the bear market ran until October 2002. The S&P 500 went down 49.1 percent.
The housing bubble led to the next bear in October 2007 and it lasted until March 2009, the S&P went down 56.4 percent.
Kenneth Roberts is a Truckee-based Registered Investment Advisor. Information is at his blog at http://www.sellacalloption.com or 775-657-8065. The mention of securities should not be considered an offer to sell or solicitation to buy investments mentioned. Consult your investment professional to understand the risks and/or how the purchase or sale of these investments may be implemented to meet your investment goals. Past performance is no guarantee of future results.
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