Financial Planning Fridays #85: Temporary Market Declines During Bull Markets

We are currently in a bull market with the S&P 500 now up about 49% since the low made in October 2022. However, it has not gone straight up during that time- instead, the market has gone through a few temporary declines of 5-10%. This is very common, and I wanted to share with you all of the temporary declines that we needed to endure during the 3 previous bull markets in order to get the outstanding returns of each one. 

This chart shows the bull market in the S&P 500 that started in 2002. It was up about 120% from its initial low to the peak it made in October 2007. This was a great 5-year return but you needed to endure a decline of 14% right at the start and then 6 more declines of more than 5% to get the full 108% return. 

Next, was the great bull market that started after the Global Financial Crisis. This time the total return from the bottom was 528% but you had to endure even more temporary declines on the way to that amazing 11-year return. There were 13 declines of 5% or more as shown here. They averaged almost 10% and lasted for about 2 and a half months each time. 

Finally, the bull market that started during the COVID pandemic looked like this. A 120% return from the bottom on March 23, 2020 until January 2022. 

No one knows how long this current bull market will last. However, we are likely to have many temporary declines along the way just like the 3 previous bull markets that we just reviewed. This is another reason why it is so important to stay invested for the long-term and to try to ignore, or even better take advantage of, the temporary declines along the way. 

Be on the lookout for our next Financial Planning Fridays episode. Subscribe to our Youtube Channel so you never miss an episode. Or contact us directly; schedule your 15-minute call with us today.