We know that recent months have been an unnerving period for many investors and thought it would be useful to provide some historical context around corrections, recessions and bear markets.
We don’t know what will happen next, but we think the historical record has a few concrete takeaways:
- Every downturn feels different because it truly is different. Investors often look at current events and say, “This has never happened before.” In one sense, that’s correct. The events that rattle financial markets or the U.S. economy, almost by definition, are unexpected and significant. Recent major bear markets like the dot-com bubble, the global financial crisis, and the COVID-19 pandemic all had very different drives and were each unique.
- The rhythm and patterns of a specific downturn are unpredictable. Bear markets and downturns come in a wide range of shapes and sizes. Big, small, long, and short. That unpredictability is a reminder of how dangerous it is to try to time financial markets. The bottom might already be in – or it might be months away. When we invest, we should do so knowing that the short-term is unpredictable.
- In the long run, we look back and see bear markets as opportunities. Especially for investors who are still accumulating assets. Downturns are the moments that – in retrospect – we wish we’d invested more. The one historical pattern that’s particularly clear is that bear markets are shorter and shallower than the bull markets that, in the long run, have carried investments higher.
Start with the definitions
Before looking at the history, let’s define the terms.
Corrections: We say that the stock market is “in correction territory” once stocks have declined by more than 10%. The S&P 500 hit its most recent closing peak on Feb. 19, 2025, and has been mostly trending downward since. The S&P 500 first closed in correction territory on March 13, 2025.
Bear market: Stocks enter a bear market once they’ve fallen 20% from their peak. This happened briefly to the S&P 500 during the trading day on April 7, 2025, but markets rebounded slightly and have yet to close 20% below their peak. Currently the S&P 500 is down about 14%.
Recession: Though it’s often talked about in the same breath, a recession refers to when the broader economy is experiencing a downturn. When the economy enters a downturn there’s often – but not always – an accompanying financial market downturn. Because economic data is released with a lag, we’re only aware somewhat retrospectively of economic downturns.
Key facts about corrections, bear markets and recessions
A few key observations help us put these downturns in context. Since 1929, we’ve had 56 corrections, meaning we have corrections around every other year on average.1 Corrections are quite common.
Only 22 corrections subsequently turned into bear markets. Once every four or five years, on average. As investors with long horizons, we certainly expect to encounter a number of bear markets during the time period we invest.
There have been 15 recessions since 1929, according to the National Bureau of Economic Research.2 Nearly every recession has an accompanying bear market, but about one-third of bear markets occurred away from an economic recession.
On average, bear markets have lasted just 10 months. Coincidentally, the average recession in the post-World War II era has also lasted 10 months, though we’d reiterate that these do not coincide directly with bear markets. Bull markets, by contrast, have lasted about three years on average with some (think the 1990s or 2010s) stretching considerably longer.
In summary, most corrections don’t become bear markets. Not all bear markets accompany recessions. In hindsight, the periods of downturn have been brief compared to periods of growth.
What causes bear markets?
During the recent downturn, we know many investors have wondered if this time is different than those in the past. Thoughts like, “The current market downturn is caused by circumstances we’ve never seen before. Maybe we should sell and wait until markets calm down.”
Let’s consider the four most recent bear markets.
- March 2000-October 2002: Over the course of 31 months, the S&P 500 fell 49%. We remember this as the bursting of the dot-com bubble. There is also the Sept. 11, 2001, terrorist attacks that coincided with an economic recession.
- October 2007-March 2009: Over the course of 17 months, the S&P 500 fell 56%. This was the global financial crisis and the great recession.
- February 2020-March 2020: In just one month, the S&P 500 fell 34%, as the COVID-19 pandemic prompted global economic shutdowns and a brief but very sharp economic recession.
- January 2022-October 2022: Over the course of 10 months the S&P 500 fell 25% as the Federal Reserve rapidly raised interest rates to tamp down an inflationary surge that was exacerbated in part by supply chain disruptions caused by the pandemic and Russia’s invasion of Ukraine in February 2022.
These bear markets lasted anywhere from one month to 31 months. Stocks fell from 25% to 56%, and each had entirely different causes. Overhyped tech stock mania and terrorist attacks, a near-collapse of the global banking system, a global pandemic, and rapid interest rate increases during an inflation surge and a land war in Europe. It’s not hyperbole to say that these four episodes have nearly nothing in common, and during the moment, each of them felt like a moment where you might say, “The world is truly different now.”
The big takeaway from bear markets
In hindsight, the clearest lesson is this: The path of bear markets has been nearly impossible to predict. Each one feels earth-shaking until one day – sometimes with us barely noticing – it doesn’t feel so remarkable anymore.
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1 Saqib Iqbal Ahmed, “S&P 500 correction in six charts,” Reuters. March 15, 2025.
2 “U.S. Business Cycle Expansions and Contractions,” The National Bureau of Economic Research. Last updated 3/14/2023.
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