4 Bad Bear Recoveries: Where Are We Now?
Doug Short | Jan 27, 2015 01:00AM ET
This chart series features an overlay of the Four Bad Bears in U.S. history since the market peak in 1929. They 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 2000 Tech Bubble bust and,
- The Financial Crisis following the 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.
The first chart shows the price, excluding dividends for these four historic declines and their aftermath. As of Friday's close are now 1835 market days from the 2007 peak in the S&P 500.
h3 Inflation-Adjusted Performance/h3
h3 Nominal Total Returns/h3
Now let's look at a total return comparison with dividends reinvested. The recovery following the 1973 oil Embargo Bear is the top performer, up 57.4% from the 2007 peak, with the current post-Financial Crisis recovery a relatively close second.
h3 Real (Inflation-Adjusted) Total Returns/h3
When we adjust total returns for inflation, the picture significantly changes. The spread between three of the four markets narrows, and the current real total return has pulled far ahead of the others. Second place, by this metric, goes to the recovery following Crash of 1929.
Here is a table showing the relative performance of these four cycles at the equivalent point in time.
For a better sense of how these cycles figure into a larger historical context, here's a long-term view of secular bull and bear markets, adjusted for inflation, in the S&P 500 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.
Footnote: When I first began featuring this comparison about six years ago, I used the Dow for the first event and the S&P 500 for the other three. However, I'm now including a pair of total return versions of the chart, which requires dividend data. Thus I'm now using the S&P 90, for which I 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.
Get The News You Want
Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.