When Will The Bear Market Give You Your Money Back?

Published on: 06/28/2022

In this edition of Chart Talk, Tony Ogorek and Jeff Viksjo discuss how long it may take for the economy to recover by looking back at previous recessions.




Welcome to another edition of Chart Talk.  I am Tony Ogorek.  I’m here with Portfolio Manager Jeff Viksjo.  And Jeff, we’ve got a couple of great charts today that are going to, hopefully, answer the questions for our clients and prospective clients… how long before I can get my money back from this bear market? So, let’s take a look at the first chart, which looks at how much the S&P 500 has fallen during recessions that go back to, probably, World War II.  What do we see here Jeff?  Which recession do you think looks the closest to what we’re probably gonna be going through here?



Yeah, I think before we can get the money back, the market’s gotta stop falling.  So, this chart tries to get at how much further do we have to go. You know Tony, we’re down about 25% so far this year, that’s down more than about half of the recessions on this page.  So that suggests we are getting close. 

You asked which recession is the closest to today, I would argue it’s probably 1981. Which is where we had a similar rise in inflation that was considered uncontrollable. Fed chairman Volker, at the time, raised rates very aggressively, much more so than we’re seeing today, to double digits to bring inflation down, which he was ultimately successful.  In that recession, the market was down about 30%.  So again, we’re almost to that number.



Great. So, let’s flip to our next chart.  And this takes a look at all the recessions, again, since World War II, looks at the average decline.  And you’re right Jeff, it’s down about a third.  Typically, markets are up two-thirds of the time, they’re down one-third of the time.  That is the reality of things.  But the real interesting thing is, what’s the breakeven from being down 20%, which is where we are right now.  Very interesting, right?



It is interesting.  If you look at COVID, it was only 6-months before we hit down 20 to all the way to breakeven.  That was extremely fast.  We don’t think it’s going to be anywhere near that close because the Fed doesn’t have those same tools available to it today that it used in COVID. However, the average shows you, it’s very close to 2-years.  So, if we hit down 20 in June, it would suggest we have 2-years until June 2024.



Right.  So, the good news is, we’re not looking at 5-years or 10-years, it’s probably on average a couple years.  It’s not gonna be done this year, but at least we have some decent guidance in terms of what investors can expect to hopefully keep them in the game and help them to keep their profits that they’ve earned over the past few years.

So, thank you again for joining us for this edition of Chart Talk.



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