This chart series features an overlay of the Four Bad Bears in U.S. history since the equity market peak in 1929. The numbers are through the September 29, 2023 close. The Four Bad Bears in U.S. history are:
- The Crash of 1929, which eventually ushered in the Great Depression,
- The Oil Embargo of 1973, which was followed by a vicious bout of stagflation,
- The Tech Bubble crash and,
- The Financial Crisis following the (then) record high in October 2007.
The series includes four versions of the overlay: nominal, real (inflation-adjusted), total return with dividends reinvested and real total return. We've chosen the aligned peaks before each of the four epic declines as our starting point. An interval of 252 days has been used for the x-axis, roughly equivalent to the number of market days in a calendar year. (Note that the x-axis in all charts shows the number of years since each bear market's peak, which have been aligned.)
The first chart below shows the price, excluding dividends, for these four historic declines and their subsequent recoveries. As of September 29, we are 4,022 market days from the 2007 peak in the S&P 500. Among the four, the bear recovery for the 1973 Oil Embargo stands out as the top performer, with a remarkable gain of 212.9%, while the Crash of 1929 lags behind as the worst performer, down 48.0%.
Inflation-Adjusted Performance
When adjusting for inflation, the 2007 Financial Crisis recovery emerges as the top performer, boasting gains of 85.6%. This gap between our current recovery and the other three widens due to several years of exceptionally low inflation.
Nominal Total Returns
Now let's look at a total return comparison with dividends reinvested. Once again, the 1973 Oil Embargo Bear recovery leads the pack, up 510.3%, while the Crash of 1929 trails behind at 24.3%.
Real Total Returns
The adjustment of total returns for inflation significantly alters the picture. The gap between three of the four markets narrows dramatically, and the current real total return since the 2007 Crisis pulls ahead of the others, up 151.5%.
Here is a table showing the relative performance of these four cycles at the equivalent point in time that provide a concise summary of the data points discussed above.
For a more comprehensive understanding of how these cycles fit into a broader historical context, we offer a long-term perspective on secular bull and bear markets. This view is adjusted for inflation and covers the S&P Composite since 1871.
These charts are not intended as a forecast but rather as a way to study the current market in relation to historic market cycles.
ETFs associated with the S&P 500 include: iShares Core S&P 500 ETF (IVV), SPDR S&P 500 ETF Trust (SPY), Vanguard S&P 500 ETF (VOO), and SPDR Portfolio S&P 500 ETF (SPLG).
Footnote: When we first began featuring this comparison about nine years ago, we used the Dow for the first event and the S&P 500 for the other three. However, we're now including a pair of total return versions of the chart, which requires dividend data. Thus we're now using the S&P 90 for the first bear market which we have dividend data. The S&P 90 was a daily index launched by Standard & Poor's in 1926 and preceded the S&P 500, which dates from March 1957.
This article was originally written by Doug Short. From 2016-2022, it was improved upon and updated by Jill Mislinski. Starting in January 2023, AP Charts pages will be maintained by Jennifer Nash at VettaFi | Advisor Perspectives
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