“Life is like riding a bicycle. To keep your balance, you must keep moving.” – Albert Einstein
The S&P 500 Index was down more than 20% on an intraday basis on Friday, May 20th, but managed a huge rally late to avoid closing down 20% and moving into an official bear market. With the S&P 500 down 16.2%, as of the close of business on May 25, 2022, a bear market is still quite possible.
One popular question has been what happens after stocks go into a bear market? “As rough as bear markets are, the good news is the future returns really improve once stocks are down 20%,” explained LPL Financial Chief Market Strategist Ryan Detrick. “In fact, a median gain of nearly 24% a year after a bear market starts may help some beaten-down bulls confidently stay the course.”
One more look at the table above shows that only three times were stocks lower a year later and all were associated with major recessions. We do not see a recession on the horizon, which could be a clue returns could be strong going out a year.
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References to markets, asset classes, and sectors are generally regarding the corresponding market index. Indexes are unmanaged statistical composites and cannot be invested into directly. Index performance is not indicative of the performance of any investment and do not reflect fees, expenses, or sales charges.
All performance referenced is historical and is no guarantee of future results. Unless otherwise stated LPL Financial and the third party persons and firms mentioned are not affiliates of each other and make no representation with respect to each other. Any company names noted herein are for educational purposes only and not an indication of trading intent or a solicitation of their products or services.
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