Daily News 19

Tag: Bear markets

  • Investing in the Stock Market at the Worst Possible Time: History Offers Reassuring News for Investors

    Investing in the Stock Market at the Worst Possible Time: History Offers Reassuring News for Investors

    Over the past few years, the stock market has remained remarkably resilient. Despite several periods of short-term volatility, the S&P 500 (SNPINDEX: ^GSPC), Nasdaq Composite (NASDAQINDEX: ^IXIC), and Dow Jones Industrial Average (DJINDICES: ^DJI) have all reached new all-time highs in recent months.

    However, record stock market highs can create a hidden risk. When the next bear market arrives—and it will eventually—investors who buy at peak prices could see their portfolios fall soon afterward.

    In 2009, a “Double Down” signal flashed for the little-known chipmaker Nvidia. For the first time in years, that same “Total Conviction” signal is flashing for a company 1/100th the size of Nvidia.

    Investing near record highs can feel intimidating, and some investors may be tempted to avoid the market and wait for a pullback. But how damaging would it really be to invest at the “worst” possible moment? History suggests the outcome may not be as bad as many investors fear—with one important caveat.

    The worst recessions have one trait in common

    Even the most severe recessions, market crashes, and bear markets are temporary. Although they can cause significant short-term financial and economic damage, long-term investors have historically been rewarded for staying invested.

    For example, imagine investing in an S&P 500 ETF in October 2007, the month the Great Recession officially began. The downturn was the most severe economic contraction in the post-World War II era, and the stock market took years to fully recover.

    The most important point for investors is that a decline in value is not the same as a permanent loss of money. An S&P 500 ETF would have lost 55% of its value during the Great Recession. But an investor who stayed invested until the market recovered would not have locked in those losses.

    From October 2007 to today, the S&P 500 has generated total returns of more than 600%. If you had invested $10,000 in an S&P 500 ETF at that time and made no additional contributions, you would have more than $70,000 today.

    S&P 500 total returns since 2007

    The same pattern has appeared repeatedly throughout market history. The dot-com bubble officially burst in March 2000, creating a bear market that was arguably even more challenging for many investors. It was one of the longest bear markets in S&P 500 history, and the Great Recession struck shortly after the market began reaching new highs again.

    Even so, an investor who bought an S&P 500 ETF in March 2000—immediately before two consecutive recessions—would have earned total returns of around 722% by today.

    S&P 500 total returns since 2000

    What history teaches long-term investors

    If there is one key lesson for investors, it is that the timing of an investment matters less when the investment horizon is long enough.

    Could an investor theoretically have earned more by waiting for the bottom of a bear market before buying? Certainly. But hindsight is 20/20, and it is impossible to know in real time where the market is heading.

    Instead of waiting for the perfect buying opportunity, investors may benefit more from investing consistently and remaining in the market for the long term. Even if you invest at the “wrong” time, history indicates that the market can more than compensate for that timing over time.

    Should you buy the S&P 500 Index right now?

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    Netflix made the list on December 17, 2004. If you had invested $1,000 at the time of the recommendation, you would have $440,710 today.* Nvidia also made the list on April 15, 2005. A $1,000 investment at the time of that recommendation would be worth $1,335,252 today.*

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    Katie Brockman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

    Source: finance.yahoo.com

  • History Says All Bear Markets Share One Trait—and It’s Fantastic News for Investors

    History Says All Bear Markets Share One Trait—and It’s Fantastic News for Investors

    Investors are growing increasingly nervous as several bear market indicators flash red. The Buffett Indicator, named after Berkshire Hathaway legendary investor Warren Buffett, suggests that the U.S. stock market is historically overvalued.

    Investor sentiment is also weakening. The American Association of Individual Investors reports that 44.4% of individual investors expect a bear market within the next six months, compared with 32.9% who anticipate a bull market. The share predicting a bear market rose by 4.5 percentage points in just one week.

    Still, even if a bear market arrives soon, history offers an important reason for long-term investors to remain focused. There is no way to know exactly when the next bear market will begin, but every bear market in U.S. history has shared a significant trait.

    Bear markets are shorter than bull markets

    A bear market is generally defined as a decline of more than 20% in a broad market index such as the S&P 500, the benchmark most commonly used to gauge the health of the U.S. stock market.

    Even the most severe and longest bear markets in U.S. history have been followed by bull markets that lasted longer—often much longer. The steepest decline was the 56.8% drop during the Great Recession, while the longest was the 31-month bear market that followed the bursting of the dot-com bubble.

    The bear market following the dot-com crash lasted 31 months from peak to trough, running from March 2000 through September 2002. It was followed by a 60-month, or five-year, bull market that continued until October 2007.

    The Great Recession then brought a 17-month bear market that lasted until March 2009. That downturn was followed by the longest bull market in history, which continued for nearly 11 years before the one-month COVID-19 bear market in February 2020.

    Since the S&P 500 was created in 1957, the stock market has spent most of its time in a bull market. There have been approximately 12 total years of bear markets, compared with about 57 years of rising markets.

    Bull market gains have historically exceeded bear market losses

    By definition, each bull market since the S&P 500 was created has produced a gain greater than the loss recorded during the preceding bear market.

    For investors, the more encouraging pattern is that bull markets have typically returned at least twice as much as the preceding bear market lost. Of the 13 bull markets since the S&P 500’s creation, only one—the 1966-1968 bull market—returned less than 1.9 times the losses from the preceding bear market.

    In some periods, the difference was substantially larger. The 1982-1987 bull market returned nine times the losses from the preceding 1980-1982 bear market. The 1990-2000 bull market returned 21 times the losses from the 1990 bear market.

    History therefore suggests that any future bear market is likely to be relatively short-lived compared with the bull market that follows. Investors who remained invested in the S&P 500 through previous bear markets eventually recovered their losses and generally achieved substantial gains after the downturn ended.

    Should you invest in an S&P 500 index fund now?

    Before investing in an S&P 500 index fund, investors should consider that The Motley Fool Stock Advisor analyst team has identified what it believes are the 10 best stocks to buy now—and the S&P 500 Index was not among them.

    The Motley Fool says the 10 selected stocks could generate significant returns in the coming years. When Netflix appeared on the list on December 17, 2004, a $1,000 investment made at the time of the recommendation would have grown to $440,710. When Nvidia appeared on the list on April 15, 2005, the same investment would have grown to $1,335,252.

    Stock Advisor’s total average return is 978%, compared with 213% for the S&P 500. The service promotes its latest list of 10 stocks and an investing community for individual investors.

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    *Stock Advisor returns as of August 29, 2026.

    John Bromels has positions in Berkshire Hathaway. The Motley Fool has positions in and recommends Berkshire Hathaway. The Motley Fool has a disclosure policy.

    History Says All Bear Markets Have 1 Trait in Common — and It’s Fantastic News for Investors was originally published by The Motley Fool

    Source: finance.yahoo.com