The 20% rule
Markets decline all the time. A dip of 5% is noise. A fall of 10% is called a correction. When prices drop 20% or more from their recent peak and stay down, it officially becomes a bear market. The name conjures a bear swiping downward — the opposite of a bull thrusting upward with its horns.
How bad are they, really?
Since 1928 the US stock market has experienced around 26 bear markets. The average decline is roughly 36% and the average duration is about 9.6 months. Compare that to the average bull market, which gains around 114% and lasts about 2.7 years. The maths is lopsided in investors' favour — but only if they stay invested.
Famous bear markets
| Bear market | Decline | Duration |
|---|---|---|
| Great Depression (1929) | −89% | 34 months |
| Dot-com crash (2000–02) | −49% | 30 months |
| Global Financial Crisis (2007–09) | −57% | 17 months |
| Covid crash (2020) | −34% | 1 month |
| Rate-hike bear (2022) | −25% | 9 months |
Why bear markets happen
Bear markets don't share one cause, but typically involve: a slowing economy or recession, rising interest rates making future profits worth less today, an external shock (pandemic, war, financial crisis), or valuations that stretched too far and needed to correct. Most bear markets involve some combination of all four.
"The stock market is the only market where things go on sale and all the customers run out of the store." — Warren Buffett
What this means for you
Bear markets feel terrible but are a normal part of investing. If you are decades from retirement, a bear market is arguably a buying opportunity — you are acquiring future wealth at a discount. The practical response: stay diversified, don't sell out of panic, and if possible, keep contributing. Missing just the 10 best days in any decade roughly halves long-term returns — and most of those best days happen during or just after bear markets.