What You Should Know About Bear Markets
- Steven C. Balch, CFP®
- Apr 30
- 3 min read
Concerns about bear markets have resurfaced recently, both in the headlines and in conversations I’m having with clients. Here’s a breakdown of some common questions and what you should know about bear markets to navigate market uncertainty confidently.
What Is a Bear Market?
A bear market occurs when stock markets decline 20% or more from recent highs. While bear markets can feel unsettling, they’ve historically been a normal part of long-term investing.
Over the past 94 years, markets have spent about 78% of the time in bull markets (periods of growth) and only about 21% in bear markets. While downturns are impactful, they’ve made up a relatively small part of the market history.
On average, bear markets last around 289 days, just under 10 months, while bull markets have historically lasted closer to 1,000 days, or about three years.
The key takeaway: Staying invested through market downturns has often rewarded those who remain focused on their long-term goals.
Do Bear Markets Mean a Recession Is Coming?
Bear markets and recessions are often mentioned together, but they are different.
Some recessions have occurred without bear markets.
Some bear markets have occurred without recessions.
While they sometimes overlap, separating short-term market volatility from broader economic shifts is important.
What Should I Do With My Investments During a Bear Market?
A few strategies to keep in mind:
Stay the course: Selling investments during downturns often locks in losses. Historically, markets have rebounded and rewarded patience.
Review your plan: Make sure your investment strategy matches your goals, time horizon, and risk tolerance. If life circumstances have changed, adjustments may be needed.
Look for opportunities: Bear markets can offer a chance to invest in quality assets at more attractive valuations.
What If I Have Major Expenses Coming Up?
If you anticipate major expenses in the next 12–24 months, such as buying a home, funding a major renovation, or covering college tuition, it's critical to plan ahead:
Set aside funds early: Money needed in the short term should not be exposed to significant market risk. Cash, CDs, or short-term high-quality bonds are better suited for near-term needs.
Avoid forced selling: You don’t want to be in a position where you must sell investments at a loss to cover an expense.
Match timing to risk: Assets intended for near-term goals should be shifted to conservative investments well before the money is needed.
When you know a major expense is on the horizon, keep that money separate from your longer-term investment portfolio.
I’m Nearing or in Retirement. Should I Consider Anything Else?
If you’re approaching or already in retirement, protecting your portfolio during bear markets becomes even more important:
Maintain liquidity: Having 12-24 months’ worth of expenses in cash can help prevent you from selling investments during downturns.
Use flexible withdrawal strategies: Adjusting withdrawals during market declines can help preserve your long-term retirement assets.
What About College Planning for My Child?
For families saving for college, bear markets are also a good reminder to:
Reassess your allocation: If your child is nearing college age, it may be time to shift to more conservative investments.
Time your withdrawals: Align tuition payments with lower-risk holdings to minimize the risk of needing to sell during a market downturn.
Stay consistent: Even during market dips, maintaining a long-term focus can help you stay on track with education savings goals.
Market downturns are uncomfortable, but they are a normal part of investing. With thoughtful planning, enough liquidity for near-term needs, and a long-term focus, you can weather bear markets with greater confidence.
If you’d like to discuss how these strategies might apply to your situation, I’m always here to help.
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