Note: Shows cumulative S&P 500 price performance, indexed to 1.00 at peak prior to bear market.
Data sources: S&P 500 daily prices from CBOE (2000-2011) and FRED (2012-2020).
But how about compared with all bear markets in U.S. history? A recent analysis by Goldman Sachs looked at all U.S. market drops over 20% since 1835 (27 of them), and found they fell into three broad categories, based on their triggers and features:
- • Event-Driven Bear Markets (n=5). These are triggered by one-off shocks that don't always lead to a
domestic recession (e.g., an oil price shock, pandemic, armed conflict, or emerging markets crisis).
• Cyclical Bear Markets (n=15). Typically a function of rising interest rates, impending recessions
and falls in profits. These are the most common bear markets and a normal part of the economic cycle.
• Structural Bear Markets (n=7). Triggered by structural imbalances and financial bubbles, such as
in the Great Depression and Great Recession. There's often a price shock, such as deflation, that follows.
By these definitions, the Covid bear market was obviously an event-driven one, and its -34% overall decline was in line with the average event-driven bear market in the U.S. since 1835 (chart below).
Data source: Goldman Sachs
Note: Full recovery is time span back to previous price level, in nominal terms.
Data source: Goldman Sachs