The Four Totally Bad Bear Recoveries: New Update

July 23, 2014

by Doug Short

Note from dshort: At the request of The Advisory Group in San Francisco, here's updated comparison of four major cyclical bear markets. The numbers are through the July 23rd close.


This chart series features an overlay of the Four Bad Bears in U.S. history since the market peak in 1929. They are:

  1. The Crash of 1929, which eventually ushered in the Great Depression,
  2. The Oil Embargo of 1973, which was followed by a vicious bout of stagflation,
  3. The 2000 Tech Bubble bust and,
  4. The Financial Crisis following the nominal all-time high in 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 today's close are now 1708 market days from the 2007 peak in the S&P 500.

Inflation-Adjusted Performance

Nominal Total Returns

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 48.3% from the 2007 peak, with the current post-Financial Crisis recovery in close second.

Real (Inflation-Adjusted) Total Returns

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 the 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 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: In previous commentaries on these bad bears, 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.

Inflation adjustment is based on the Consumer Price Index.

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