Right now, the U.S. market is down about 10% from its all-time high, reached in November 2007. That means we’ve been in a secular (very long term) bear market for the last 4 1/2 years. How bad is this secular bear compared to others? Here is a list of the 10 worst bear markets in modern history:
10) Wall Street 1901-03: -46%
The market was spooked by the assassination of President McKinley in 1901, coupled with a severe drought later the same year.
9) Wall Street 1906-07: -48%
Markets took fright after President Theodore Roosevelt had threatened to rein in the monopolies that flourished in various industrial sectors, notably railways.
8 Wall Street 1937-38: -49%
This share price fall was triggered by an economic recession and doubts about the effectiveness of Franklin D Roosevelt’s New Deal policies.
7) London 2000-2003: -52%
The UK took sixth place in the table with a 52 per cent market fall between 2000 and 2003 as investors suffered the consequences of the collapse of the technology bubble
6) Wall Street 2007-2009: -57%
The housing market bubble burst, causing a near-meltdown of the global economy.
5) Hong Kong 1997-98: -64%
The Hong Kong stock market’s heavy fall in 1997-1998 came as investors deserted emerging Asian shares, including a very overheated Hong Kong stock market
4) London 1973-74: -73%
Next came the UK stock market’s 73 per cent drop in 1973 and 1974. set against the backdrop of a dramatic rise in oil prices, the miners’ strike and the downfall of the Heath government.
3) Japan 1990-2003: -79%
In third place, with a 79 per cent decline, was the Japanese stock market, which suffered a protracted slide in price from 1990 to 2003 as a share and property price bubble burst and turned into a deflationary nightmare.
2) US Nasdaq 2000-2002: -82%
The second biggest collapse came from the technology-rich US Nasdaq index, which fell by 82% following the bursting of the dot.com bubble in 2000
1) Wall Street 1929-32: -89%
The Wall Street Crash that preceded the Great Depression heads the list, with the US stock market falling by 89% between 1929 and 1932. The bursting of the speculative bubble led to further selling as people who had borrowed money to buy shares had to cash them in in a hurry when their loans were called in.
So does this make you feel any better by showing how much worse things could be? Me neither. Fact is, these long bear markets are becoming more common. Fear and uncertainty rule the day. Nobody knows how low the market will go the next time before it finds a bottom. Our advice to investors is to stay invested in stocks, but don’t get too aggressive. Let’s wait until some semblance of clarity returns to the global economy before we go back to a fully invested position.
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