With the stock market on one of its worst losing streaks in decades amid a relentless selloff that has pushed the S&P 500 nearly 20% below its record highs, recession risks are rising, but history shows that not all bear markets lead to long term downturns.
Not all bear markets lead to recessions.
The benchmark S&P 500 index briefly fell into a bear market last Friday, at one point down over 20% from its peak in January, as surging inflation and rising rates lead to recession fears.
The last bear market was in March 2020 when the U.S. economy was in a recession.
Eight out of 14 prior bear markets since World War II have preceded recessions, while the other six did not.
It takes the index an average of 95 days to hit the end of a bear market once the S&P 500 hits 20%.
In more than half of the fourteen bear markets since 1945, the S&P 500 hit a low point within two months of falling below the 20% threshold, and forward returns were largely positive.
If the U.S. economy can avoid falling into a recession, then stocks would be in a better position going forward, as bear markets that occur before a recession are longer and have larger losses.
The stock market has had a long streak of losses. The S&P 500 and tech-laden Nasdaq have lost seven weeks in a row, their longest losing streaks since the dot.com crash.
The last four times the index lost 1% or more was in 1973, 1980, 1990 and 2001, according to data from Bespoke. Those streaks occurred either before or very early into a recession.
In 1970, 1980 and 2001 the S&P 500 lost at least seven weeks in a row. Major Wall Street firms have warned that the index could tank if the economy goes into a recession.
The S&P 500 briefly fell into bear market territory, as investors were unnerved by persistent inflation, another Fed policy mistake, and recession fears. The widespread selling will only accelerate as investors are cautious until the Fed starts to show signs that they are worried about financial conditions.
The S&P 500 briefly fell into the bear market.
According to Goldman, the worst case scenario for stocks is.
The S&P 500 is near a bear market territory.
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