When the markets and economy are good, it is easy for investors and financial professionals to forget that things can go south – and often do.
The reality: bear markets (a 20 percent or greater decline in stock prices from a peak) are a regular part of the economic cycle. According to Kiplinger, since 1932, bear markets have occurred, on average, every 56 months (about 4 years and 8 months). That is based on data from the S&P Dow Jones Indices.
Note that while often associated with economic recessions, roughly 20 to 30 percent of bear markets are not accompanied by one, based on historical data since 1929 reported by CNBC. This makes them unpredictable.
This article digs into the history of bear markets, why they happen, and how to plan for them.
History of Bear Markets Since 1928
Bear markets are not uncommon. There have been 27 bear markets in the S&P 500® since 1928, occurring roughly every 3.5 years. These declines of 20 percent or more have historically experienced a 35 percent drop in value and typically lasted around 10 months. These market declines are considered a normal part of the economic cycle. This is based on information provided by Keen Wealth Advisors.
The following table documents all bear markets since 1928, the year before the most notable one triggered by The Great Depression. It demonstrates the regularity of bear markets, and how easy it can be to forget about them during extended periods of positive market performance.
| Start and End Date | % Price Decline | Length in Days |
| 9/7/1929–11/13/1929 | -44.67 | 67 |
| 4/10/1930–12/16/1930 | -44.29 | 250 |
| 2/24/1931–6/2/1931 | -32.86 | 98 |
| 6/27/1931–10/5/1931 | -43.10 | 100 |
| 11/9/1931–6/1/1932 | -61.81 | 205 |
| 9/7/1932–2/27/1933 | -40.60 | 173 |
| 7/18/1933–10/21/1933 | -29.75 | 95 |
| 2/6/1934–3/14/1935 | -31.81 | 401 |
| 3/6/1937–3/31/1938 | -54.50 | 390 |
| 11/9/1938–4/8/1939 | -26.18 | 150 |
| 10/25/1939–6/10/1940 | -31.95 | 229 |
| 11/9/1940–4/28/1942 | -34.47 | 535 |
| 5/29/1946–5/17/1947 | -28.78 | 353 |
| 6/15/1948–6/13/1949 | -20.57 | 363 |
| 8/2/1956–10/22/1957 | -21.63 | 446 |
| 12/12/1961–6/26/1962 | -27.97 | 196 |
| 2/9/1966–10/7/1966 | -22.18 | 240 |
| 11/29/1968–5/26/1970 | -36.06 | 543 |
| 1/11/1973–10/3/1974 | -48.20 | 630 |
| 11/28/1980–8/12/1982 | -27.11 | 622 |
| 8/25/1987–12/4/1987 | -33.51 | 101 |
| 3/24/2000–9/21/2001 | -36.77 | 546 |
| 1/4/2002–10/9/2002 | -33.75 | 278 |
| 10/9/2007–11/20/2008 | -51.93 | 408 |
| 1/6/2009–3/9/2009 | -27.62 | 62 |
| 2/19/2020–3/23/2020 | -33.92 | 33 |
| 1/3/2022–10/12/2022 | -25.43 | 282 |
| Average | -35.24 | 289 |
Source: Ned Davis Research March 2025.
Notable Bear Markets and the Damage They Caused
All bear markets are not created equal. Several have lasted long and inflicted significant financial harm. By contrast, bear markets like the one after COVID-19 were remarkably short, and recovery happened quite quickly. Bear markets are unpredictable beasts. Some notable ones since 1928 include:
The Great Depression (1929 to1933). This series of bear markets [AY1] was the granddaddy of all bear markets. A banking panic in the United States resulted in a collapse in the money supply. Gross domestic product, industrial production, employment, and land prices dropped significantly. The Dow Jones fell by 89 percent during this period.
Recession of 1937 (May 1937 to March 1938). This bear market is relatively minor when compared to the Great Depression. Still, it was one of the worst in the 20th century, resulting in an almost 55 percent drop. Share prices fell due to a recession and doubts about New Deal economic policies.
Black Monday Recession (August to December 1987). This bear market included the single-largest one-day percentage decline in U.S. stock market history. The dramatic drop is often attributed to program trading and illiquidity. Despite the record-breaking day, this recession was relatively shallow (a 33.5 percent drop) and short. In the end, the Dow finished the year with a two percent increase.
Dot-Com Bubble (2000 to 2002). In 2001, stock prices fell sharply after the internet bubble burst, as investors sold overvalued internet stocks. After recovering from lows reached immediately after the September 11 attacks, indices slid steadily beginning in March 2002, with dramatic declines in July and September leading to lows last reached in 1997 and 1998. Here is the year-after-year performance of two indices to show the scope of the decline:
Nasdaq
- In 2000, the Nasdaq lost 39.28 percent of its value (4,069.31 to 2,470.52).
- In 2001, the Nasdaq lost 21.05 percent of its value (2,470.52 to 1,950.40).
- In 2002, the Nasdaq lost 31.53 percent of its value (1,950.40 to 1,335.51).
Dow Jones Industrial Average
- In 2000, the Dow lost 6.17 percent of its value (11,497.10 to 10,788.00).
- In 2001, the Dow lost 5.35 percent of its value (10,788.00 to 10,021.60).
- In 2002, the Dow lost 16.76 percent of its value (10,021.60 to 8,341.63).
The Nasdaq took a bigger hit during this period because of its greater concentration of internet-related stocks.
Great Recession (2007 to 2009). The Great Recession has been linked to the subprime home mortgage crisis. Subprime mortgages are home loans given to borrowers with poor credit histories. They are considered high-risk loans.
During the United States housing boom in the early to mid-2000s, mortgage lenders that wanted to take advantage of rising home prices were less restrictive about the types of borrowers they approved for loans. And as housing prices continued to rise, other financial institutions purchased these risky mortgages in bulk, typically as mortgage-backed securities, as an investment, hoping to earn a quick profit. When housing prices fell, mortgages and securities became worthless, triggering a major market crash.
Markets dropped more than 50 percent over a year and a half.
COVID-19 (2020). This was the fastest bear market in history, falling 34 percent in just over a month before a quick recovery.
Inflation / Rate Hikes (2022). This latest bear market was a 10-month downturn driven by the Fed’s interest rate hikes to curb high post-pandemic inflation. The S&P 500 fell 25 percent during the period. This bear market proved that the traditional 60 percent equity, 40 percent bond portfolio is flawed because both fell in tandem. [LINK TO OTHER BLOG POST]
Near-Term Likelihood of a Bear Market
The U.S. economy and markets have been resilient even against significant headwinds, including:
- Energy prices and inflation. Renewed inflation, spurred by oil prices, could pressure the Fed to keep interest rates high, potentially causing stagflation.
- Geopolitical instability. Ongoing tensions in the Middle East and other parts of the world could disrupt global trade, posing significant risks to supply chains.
- Rolling recession. Even though different sectors of the economy have shown signs of slowing, it has not yet transitioned into broader contraction. That could still happen, considering all the pressures on it.
These factors suggest that markets, from steady to soaring, could turn bearish at any time.
Choices Beyond Equity and Bonds
Investors and investment advisors often turn to alternative investments, gold, and cash to diversify portfolios, reduce volatility, and hedge against market downturns and inflation. These assets often have low correlation to stocks and bonds, providing a level of protection during crises. Gold typically acts as a safe-haven, cash offers liquidity, and alternatives the potential for higher returns.
Some benefits of turning to these types of solutions include:
- Diversification and protection: Alternative investments like real estate, private equity, and commodities often don’t perform like stocks and bonds, reducing overall portfolio risk, often delivering positive returns during market downturns.
- Crisis control: Gold and cash can deliver liquidity during market downturns when other assets are hard to sell or falling in value.
- Reduced volatility: Gold generally acts as a portfolio stabilizer during turbulent periods, often exhibiting lower volatility than equities and a low or negative correlation to stocks, particularly during deep market drawdowns.
- Opportunity: Holding cash allows investors to buy undervalued assets when markets are low.
Despite the benefits, many advisors and investors avoid these types of investments due to their relative complexity and lack of understanding.
How Tactical Investing Looks to Protect Your Clients from Bear Markets While Taking Advantage of Upturns
To make the case once again, bear markets happen relatively frequently and are unpredictable. They can cause significant damage to investors’ portfolios and their long-term financial goals.
One way to deal with this is by taking a tactical approach to investing.
Tactical investing (or tactical asset allocation) is an active management strategy. It is designed to temporarily adjust a portfolio’s asset mix to capitalize on short-term market opportunities or to avoid risks. Unlike a passive buy-and-hold approach, this method allows investors to deviate from their long-term target allocation – such as shifting from stocks to cash, bonds, or alternative investments – when market conditions change.
Key components of tactical investing include:
- Active hands-on management: Investors, or managers, leverage market data, economic indicators, technical analysis, and other factors to make decisions.
- Seeks to limit risk while enjoying upside benefits: It is often used to manage downside risk during high-risk market conditions by shifting to safer assets. It moves back to higher-performing asset classes when conditions improve.
- Sector rotation: Tactical strategies often transfer funds into sectors expected to outperform in the short term, which can be beneficial during uncertain times.
- Flexibility: The approach is far more flexible than a standard 60 percent equity and 40 percent bond portfolio, allowing investors to potentially move to positions such as all cash or alternative investments when appropriate.
Bottom line: Tactical investing can potentially enhance returns, reduce volatility, and increase portfolio diversification.
How to Get Started with Tactical Investing
Many investors – and investment advisors – are uncomfortable with going all-in with tactical investing even though it can benefit them.
That’s why many incorporate it into portfolios in a more limited way, often as a 20 percent allocation. This allows them to see the benefits of tactical investing with limited risk exposure. It’s also a way to introduce gold and other alternative investments into a portfolio at opportune times.
This approach to investing offers a fresh opportunity to discuss a new strategy with clients that could benefit from it. It shows that you care about them and their futures, especially during changing times like today, when a down market could happen at any time.
Find out about a tactical investment strategy that could benefit your clients and provide a fresh opportunity to present to them.
About McElhenny Sheffield
McElhenny Sheffield believes that avoiding material losses is the foundation of successful long-term investing. Risk management and capital preservation are the firm’s top priorities.
The firm is committed to protecting investors’ financial futures through a proven rules-based, momentum-driven, trend-following tactical ETF strategy, and positioned as a tactical allocation for advisors who need to protect their clients’ core portfolio while still seeking growth.
Clients include independent-thinking investment advisors across the U.S., large investment allocators, and high-net-worth individuals and families looking for a second opinion. McElhenny Sheffield also provides sub-advisory services for RIAs and financial advisors. The firm was founded in Dallas, TX, in 2000, and as of March 31, 2026, manages more than $760 million in assets under management.
Past performance is not necessarily indicative of future results. Investing involves risk. Principal loss is possible. The Standard & Poor’s 500 Index is an unmanaged barometer of 500 leading publicly traded, large‑capitalization U.S. companies. It is not possible to invest directly in an index, and performance does not reflect the deduction of fees, expenses, or taxes. There can be no assurance that tactical strategies will be implemented as designed, or profitable, or that clients will not lose money. The tactical strategies use a variety of market indicators and stop levels that seek to identify upward or downward trends in the U.S. equity markets. If an indicator or stop level fails to detect significant downturns in the market, the strategy will continue to be exposed to underlying positions that could lose value during such downward periods. Similarly, if the indicators fail to timely identify a reversal of a downward trending market, the strategies will continue to be exposed to defensive Exchange Traded Funds (ETFs) at a time when there is significant appreciation in the equity markets. Either scenario could result in the strategies underperforming other strategies that do not employ these strategies. There can be no guarantee the tactical strategies will correctly or timely identify the industries, sectors, or asset classes that will outperform during a given quarter or that the strategies will correctly or timely identify market trends. The tactical strategies invest in other investment companies and ETFs which result in higher and duplicative expenses. Investing in ETFs are subject to risks that the market price of the shares will trade at a discount to its net asset value (NAV), an active secondary trading market will not develop or be maintained, or trading will be halted by the exchange in which they trade. The information contained in this article has been obtained from sources believed to be reliable; however, its accuracy, completeness, and timeliness cannot be guaranteed. Any opinions or estimates reflect the author’s judgment as of the date of publication and are subject to change without notice. This material is provided for informational purposes only and should not be construed as legal, tax, or investment advice. Investors should consult their tax advisor or legal counsel for advice and information concerning their particular situation.
[AY1]Or did you intend as ‘bear market’? In the future please highlight all new text. I did a doc compare and saw what changed but helpful for you to highlight, if possible.