Anatomy of a Recovery: 4 Stages of a Bear Market
CFA | SVP, Chief Investment Officer
1 The initial fall
From the beginning of the market’s fall on October 9th, through September 19th, the S&P 500 was still technically in a “correction” phase, falling -18.1% (phase #1). Then, the floor fell out from September 19th though October 10th, with the S&P 500 falling another -28.3% (phase #2), thus bringing the full initial drop to -41.3%.
2 The bounce
Do you remember the great bull market of October 10th, 2008? No? How about the bull market of October 27th through November 4th, 2008? Still no? I understand–it was more than a decade ago. Well, you surely remember the Thanksgiving Day bull market rally of November 20th thru January 6th, 2009 - It was a huge +24.7% movement. Right–I don’t remember any of them, either. All three of these periods are perfect examples of where we find ourselves today, and that is on step #2, the Bounce.
3 The re-test
Historically, a significant amount of bear markets experience a “re-test” of market lows before finally advancing to a longer period of broad recovery. In many cases, these “re-tests” often exceed the levels seen in Stage #1, the initial fall.
4 The recovery
The road to recovery for the last 5 most significant drawdowns Post World War II, (defined here as a drawdown greater than 30%), has been significantly quicker than the historical averages of the last 185 years.
Your investments in securities, annuities and insurance are not insured by the FDIC or any other federal government agency and may lose value. They are not a deposit or other obligation of, or guaranteed by any bank or bank affiliate and are subject to investment risks, including possible loss of the principal amount invested. Past performance does not guarantee future results.
First Citizens Wealth Management is a registered trademark of First Citizens BancShares, Inc. First Citizens Wealth Management products and services are offered by First-Citizens Bank & Trust Company, Member FDIC; First Citizens Investor Services, Inc., Member FINRA and SIPC, an SEC-registered broker-dealer and investment advisor; and First Citizens Asset Management, Inc., an SEC-registered investment advisor.
Brokerage and investment advisory services are offered through First Citizens Investor Services, Inc., Member FINRA and SIPC. First Citizens Asset Management, Inc. provides investment advisory services.
Bank deposit products are offered by First Citizens Bank, Member FDIC.