The Dow entered a bear market. Here's what that means for investing in stocks.
And then there were none.
The Dow Jones Industrial Average finally succumbed to the selling pressure on Monday, for the first time joining the Nasdaq-100 and Standard & Poor's 500, the other two major U.S. stock indices.
The commonly accepted definition of a bear market is at least a 20% market decline from recent highs.
The tech-heavy Nasdaq, the first to fall, is well into bear market territory, down more than 33% compared with its November peak. The S&P 500, succumbed during the summer, is down just more than 24% from its January high. The Dow is now just more than 21% below its January peak.
Stocks closed a choppy Tuesday mixed, with the Dow giving up a 400-point gain to end down 0.43%. The S&P 500 closed down 0.21% while the Nasdaq edged up 0.25%.
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"Today’s (Tuesday's) stock market rebound (was) just as fragile as my daughter’s Magna-Tile tower that she is making next to her brother’s Hot Wheels racetrack," said Edward Moya, senior market analyst at OANDA. "Investors are scrambling for ideas on where to invest."
When will a bear market end?
There's no rule for how long bear markets can last.
Typically, when researchers study bear markets, they pay the closest attention to S&P 500 index. For instance, the bear market that quickly unfolded when the pandemic began in the U.S. lasted 33 days, making it the shortest bear market since the Great Depression.
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Longest bear market in history
The longest bear market began in November 1973 and lasted 630 days, according to an analysis by Ned Davis Research. During that time, inflation was rampant in the U.S. and OPEC stopped importing oil into the U.S., resulting in a recession.
According to some analyses, the Great Depression, which lasted from 1929 to 1939, was the longest bear market. Other analyses break up the 10-year time frame into smaller segments of bear markets as opposed to one overarching one.
How long does the average bear market last?
The average length of the 26 S&P 500 bear markets since 1926 is around 9.6 months. The average S&P 500 decline over the course of those bear markets was more than 35%, according to Ned Davis Research.
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Should you buy or sell stocks during a bear market?
In general, panic buying or selling stocks isn't a winning strategy. Some market analysts say the best thing to do during heightened market volatility is nothing.
But if you've got extra cash on hand, consider buying "quality companies with high and stable earnings," said Geetu Sharma, founder and investment manager at AlphasFuture LLC based in Minneapolis.
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"Our portfolios are tilted towards quality and defensive sectors such as healthcare and staples that are likely to prove more resilient in this ongoing volatility."
These sectors tend to outperform others during recessions, though bear markets don't always coincide with recessions.
Consider sitting out volatility with bonds
With interest rates set to continue rising in the near-term as the Fed fights inflation, investors might want to consider locking in some income with bonds.
"Given the rise in interest rates, our expected returns for bonds over the next decade have increased by almost 2% since September 2021," said Greg Davis, Vanguard chief investment officer. "Holding bonds makes even more sense now, and they still play an important role in a well-diversified portfolio."
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Elisabeth Buchwald is a personal finance and markets correspondent for USA TODAY. You can follow her on Twitter @BuchElisabeth and sign up for our Daily Money newsletter here