S&P 500 index

The S&P 500 index has now entered a bear market, but the past offers little guidance.

From January 1973 to October 1974, a period of stagflation due to the oil embargo that caused inflation to spike and economic growth to slow, the S&P 500 lost 48.2%. The index has fallen by 21.8% since its peak in early January. Since 1929, there have now been 15 bear markets of varying length and severity.

A bear market is defined by a broad market index falling by 20% or more from a recent high. And as of market close Monday, the S&P 500 index officially…

Less than a month after the S&P 500 temporarily slipped into bearish territory, the benchmark stock market index officially fell into a bear market.

Last month, a Bankrate survey revealed that younger investors are using the market selloff to their advantage and buying the dip. Whether this bear market will douse the sizzling jobs market remains to be seen. The market considers this a top recession indicator since it has predicted seven of the past eight recessions. While timing the bottom can be a challenging feat, investment experts argue that if investors are buying the dip, they should be holding these securities for the long term. Investment bank strategists came up with this figure by calculating that the index slumped from peak to trough by a median rate of 24 percent across 12 recessions. In 1973, 2000, and 2007, the S&P 500 cratered by an average of 51.4 percent before hitting its bottom. The unemployment rate has typically ticked higher during bear markets. The index now joins the tech-heavy Nasdaq Composite Index in a bear market. Earlier in the trading session, the five-year and 30-year Treasury yields had also briefly inverted. In contrast, the bull market starts when the index’s closing price rallies 20 percent from its most recent low. This is when the closing price of a stock index officially falls 20 percent from its most recent high. Year-to-date, the S&P 500, which includes Apple, Berkshire Hathaway, and Tesla, has tumbled by nearly 22 percent.

With the S&P 500 more than 20% off its peak, and tech stocks down even further, your first task is to take a deep breath and assess your risk.

The growth-stock driven Nasdaq Composite Index has been in a bear market since March and is down 32% from its high last year. That’s when the S&P 500 finally slipped into a bear market, which is generally defined as a market close at least 20% below its peak. The rally in stocks that had been boosting retirement fund balances sputtered early this year, but it came to a sharp end on June 13.

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When the S&P 500 has fallen 20% at a faster clip, the index has averaged a loss of 28%. The biggest decline since 1945 occurred in the 2007-2009 bear market when the S&P 500 fell 57%. That includes two separate days in the middle of the 2007-2009 bear market where the S&P 500 surged roughly 11%, as well as leaps of better than 9% during and shortly after the roughly monthlong 2020 bear market. Many of the best days for Wall Street have occurred either during a bear market or just after the end of one. But the pain is spreading widely, with retailers signaling a shift in consumer behavior. Higher rates also make investors less willing to pay elevated prices for stocks, which are riskier than bonds, when bonds are suddenly paying more in interest thanks to the Fed. The risk is the Fed could cause a recession if it raises rates too high or too quickly. Market enemy No. 1 is interest rates, which are rising quickly as a result of the high inflation battering the economy. Consumer prices are at the highest level in four decades and rose 8.6% in May compared with a year ago. The most recent bear market for the S&P 500 ran from February 19, 2020, through March 23, 2020. But the "buy the dip" rallying cry popular after every market slide has grown more fainter — a recent rebound in stock prices was wiped out by a furious bout of selling over the past four days. The Federal Reserve has signaled it will aggressively raise interest rates to try to control inflation, which is the highest in decades.

The S&P 500 Index ended trading on June 13, 2022 down by 21.8% from the high close for the year, thus officially defining a bear market.

Through market close on June 1, 11 of the S&P 500 sectors are down year-to-date (YTD) down so far in 2022. From March 24, 2000 to Oct. 9, 2002 (929 days), the S&P 500 dropped by 49.1%, From Oct. 9, 2007 to March 9, 2009 (517 days), it fell by 56.8%.2 The index is down by 21.8% from its previous closing high, which it reached on January 3, 2022.1 The previous bear market, sparked by the newly unfolding COVID-19 pandemic, ran for 33 days from peak to trough (Feb. 19, 2020 to March 23, 2020), during which time the S&P 500 declined by 33.9%. The two bear markets prior to that were much lengthier and deeper. The S&P 500 is a capitalization-weighted index. - This means the S&P 500 is now in a bear market, normally defined as a drop of 20% or more in a market index. All these stocks have posted larger YTD declines than the S&P 500 as a whole, leading the index down. The six sectors posting year-to-date declines of less than 20% are financials (-19.6%), industrials (-17.1%), health care (-13.9%), materials (-13.8%), consumer staples (-9.5%), and utilities (-5.6%).3 - The S&P 500 Index ended trading on June 13, 2022 down by 21.8% from its previous closing high, which it reached on Jan. 3. - Among the 11 S&P 500 industry sectors, ten are down year-to-date, and four of them by 20% or more. Four sectors are down by 20% or more year-to-date: consumer discretionary (-33.3%), communication services (-31.4%), information technology (-28.5%), and real estate (-24.6%).3 The S&P 500 Index fell below the 20% threshold to be considered a "bear market," at the close of trading on June 13, 2022.