Bear Market

Imagine checking your portfolio and seeing it down 25% from where it was a few months ago. That sinking feeling? You're likely in a bear market—officially recognized when a major index falls 20% or more from its recent peak. Bear markets are driven by recessions, rising interest rates, geopolitical crises, or the unwinding of speculative bubbles.

Since 1950, the S&P 500 has gone through roughly 10 bear markets. The average one lasted ~14 months with an average decline of 36%. The worst was the 2007-2009 financial crisis (-57%), while the shortest was the 2020 COVID crash—just 33 days from peak to trough.

Crypto bear markets (often called "crypto winters") hit even harder. Bitcoin has experienced multiple 80%+ drawdowns. These extended downturns can last 1-2 years and wipe out many projects that launched during the preceding hype cycle.

The single most important thing to know about bear markets: panic selling is almost always the wrong move. Historically, the worst thing you can do is sell at the bottom and miss the recovery. The best days in the stock market often happen during bear markets, and missing just the 10 best days over a 20-year period can cut your total return in half.

Bear markets also create real opportunities if you're a long-term investor. Dollar-cost averaging (investing a fixed amount on a regular schedule) during a downturn means you're buying assets at lower prices. Tax-loss harvesting opportunities are plentiful, and quality companies trading at discounted valuations can become excellent portfolio additions.