When the Bear Comes out of Hibernation

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Bear Markets: What You Need to Know

What is a bear market?

A bear market is triggered by a market decline of 20%. Each stock market will enter bear market territory at slightly different times depending on when they reach that 20% drop.

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Based on Ned Davis Research data of S&P 500 Index performance between January 3, 1928 and February 22, 2022. One cannot invest directly in an index.

Bear market ≠ economy

A market decline doesn’t necessarily mean that the economy is in trouble. Over the past century, there have been more than two dozen bear markets on the S&P500, but only 15 economic recessions* – which is defined by the economy experiencing two or more quarters of negative growth (or decline).

That said, a bear market can occur hand in hand with an economic recession. And as with the stock markets, individual economies can go into recession at different times.

Bear markets are short-lived

The average bear market lasts less than a year.

The chart below shows the bull and bear markets in the Canadian stock market over the past 60-plus years. The bull markets (purple line) on average lasted longer (41.6 months vs. 8.2 months) and their average gain (103.6%) was higher than the average drop during the bear markets (-24.6%).

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Source: Bloomberg and Morningstar Direct, S&P/TSX Composite Total Return Index, February 1, 1956 – December 31, 2021. The information provided is for illustrative purposes only and is not meant to provide investment advice. You cannot invest directly in an index.

How can you protect yourself from the bear?

As in real life, you probably shouldn’t run from a bear (market).

Reach out to your financial advisor who can help ensure your portfolio is diversified appropriately for your risk level, investment goals and time horizon.

And if you have questions about market volatility, visit AGF.com/volatility. There you’ll find articles and videos that discuss the current markets as well as providing context and tips for managing volatility on an ongoing basis.

 

*Source: https://www.barrons.com/articles/bear-market-stocks-whats-next-51655150790. https://www.nber.org/research/data/us-business-cycle-expansions-and-contractions. 
The commentaries contained herein are provided as a general source of information and should not be considered personal investment or tax advice. Every effort has been made to ensure accuracy in these commentaries at the time of publication; however, accuracy cannot be guaranteed. Market conditions may change investment decisions arising from the use or reliance on the information contained here.

The contents of this Web site are provided for informational and educational purposes, and are not intended to provide specific individual advice including, without limitation, investment, financial, legal, accounting or tax. Please consult with your own professional advisor on your particular circumstances.

AGF Management Limited (“AGF”), a Canadian reporting issuer, is an independent firm composed of wholly owned globally diverse asset management firms. AGF’s investment management subsidiaries include AGF Investments Inc. (“AGFI”), AGF Investments America Inc. (“AGFA”), Highstreet Asset Management Inc. (“Highstreet”), AGF Investments LLC (formerly FFCM LLC) (“AGFUS”), AGF International Advisors Company Limited (“AGFIA”), Doherty & Associates Ltd. (“Doherty”) and Cypress Capital Management Ltd. (“CCM”). AGFI, Highstreet, Doherty and Cypress are registered as portfolio managers across various Canadian securities commissions, in addition to other Canadian registrations. AGFA and AGFUS are U.S. registered investment advisers. AGFIA is regulated by the Central Bank of Ireland and registered with the Australian Securities & Investments Commission. AGF investment management subsidiaries manage a variety of mandates composed of equity, fixed income and balanced assets.

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June 15, 2022
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