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 December 31, 2024 close. These charts are not intended as a forecast but rather as a way to study the current market in relation to historic market cycles.
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.
Obviously there have been many other bear markets over the past 100 years, but we have chosen to focus on these four as they considered among the worst in history.
We have taken the market peak that occurred before each major decline (shown on each chart) and aligned those four dates to create a single starting point. The x-axis in each chart shows the number of years since the aligned peaks and is using an interval of 252 days which is roughly equivalent to the number of market days in a calendar year. By using this method, we can analyze and compare where each recovery was at after X amount of time. The series includes four versions of the overlay: nominal, real (inflation-adjusted), total return with dividends reinvested and real total return.
The first chart below shows the price, excluding dividends, for these four historic declines and their subsequent recoveries. At the end of December 2024, we are 4,337 market days from the 2007 peak in the S&P 500, just over 17 years. Among the four, the bear recovery for the 2007 Financial Crisis stands out as the top performer, with a remarkable gain of 275.8%, while the Crash of 1929 lags behind as the worst performer, down 51.0%.
Inflation-Adjusted Performance
When adjusting for inflation, the 2007 Financial Crisis recovery is still the top performer, but with significantly lower gains. The gap between our current recovery and the other three widens due to several years of exceptionally low inflation. Most notably, the 1973 Oil Embargo recovery is reduced dramatically after being adjusted for inflation, going from nearly 200% nominal gains to only 1% real gains. This should come as no surprise though when you consider the large stretches of stagflation the economy experienced throughout the 70s following the oil embargo.
