History Shows Investors Who Buy During Bear Markets Will Likely See Huge Gains

There was an update on Mar 22, 2022, at 04:35pm.

Despite the tech-laden Nasdaq dipping into a bear market last week, experts are urging investors to buy the dip in the market, as historical data shows that investors should look past market volatility.

The tech-laden index dipped into bear market territory on March 14th, at its lowest point since November, as it rebounded somewhat in the last week.

It's not clear whether a down market will turn out to be a blip in the road or a full-fledged recession, but historical data shows that those who buy in bear markets tend to be rewarded with stocks often roaring back over one-, three-, five.

Buying when stocks are in a bear market is a good strategy according to Ben Carlson, director of institutional asset management at Ritholtz Wealth Management.

The data shows that since the start of a bear market, the index has returned 22% after one year, 52% after three years, and 87% after five years.

Mark Hackett, Nationwide's chief of investment research, says that last week's rally reflects the willingness of investors to shift to a new mindset.

Despite the uncertainty surrounding the Federal Reserve's rate hikes, the market still has upside, and it recently noted that stocks could see a 10% rally from current levels.

Carlson said in a recent note that most of the time the world doesn't end.

Surprising Fact:

During the last two bear markets of the last two years, the index is up 235% since the global financial crisis.

Key Background:

Even as the Federal Reserve begins aggressively raising rates to combat surging inflation and the Russia-Ukraine conflict continues to weigh on markets, there could be an upside surprise for U.S. economic growth, predicts Moody's. Policymakers now need to work quickly, though not too quickly, if the Federal Reserve is able to quickly reestablish interest rates.

What To Watch For:

As long as Russia continues to pursue its invasion of Ukraine, there will be serious threats to the economy. If the European Union followed the United States in banning Russian oil imports, oil prices would go up to $150 per barrel and gas prices would go up to $6 per gallon.

The stock market jumped as investors prepared for bigger rate hikes to fight inflation.

The best week since November 2020 has seen the stock market gain nearly 300 points.

Analysts reveal their top stock picks.

Powell announced a 0.25 increase in the Federal Reserve's rate.