S&P 500 Teetering on the Edge of a Bear Market

Additional content provided by Brian Booe, Associate Analyst, Research

After last week’s eyebrow-raising selloff and a roller coaster session on Monday, U.S. equities attempted to claw back a portion of their recent losses yesterday. Markets initially cheered potential trade deals that could be around the corner for Japan and South Korea, also noting headlines suggesting the Trump administration may be willing to admit that negotiating could be necessary. However, another bout of volatility halted Wall Street’s advance after a White House official stated the U.S. will proceed with levies on China as high as 104% (they went into effect at midnight last night). Tuesday’s choppy session ended with major averages extending recent declines in the final minutes of trading, nearing the threshold of a bear market. While it’s important to note a bear market is more than just one week of intense selling, it’s also important to remember that bear market recoveries usually don’t take too long.  

Most Bear Market Recovery Times Don’t Take Long 

A bear market is generally defined as when an index (or security) closes 20% or more below its 52-week high (the S&P 500 closed 18.9% below its February 19 high yesterday). Based on the large cap equity benchmark S&P 500 since 1957, bear markets typically last less than a year, or around 11 months to be exact, with 30 months between all-time highs. This stat includes bear markets during recessionary and non-recessionary periods for the U.S. economy, plus for this study, we took the liberty of including several 19% drops as well. Absent a recession, the duration is even shorter. Non-recessionary bears last an average of seven months with only 16 months between record levels for the S&P 500, which is much shorter than the recessionary average of 27 months and 43 months passing between highs.  

On the topic of recessions, rising recession odds have been one of the factors of uncertainty in the recent sell off, which were rising even before the April 2 tariff announcements. But odds remain slightly tilted toward no recession at this point but that could change depending on how high these tariffs remain in place. LPL Research continues to expect tariff rates to come down following trade negotiations, providing economic and earnings relief.  

Bear Market Recovery Times Vary, but Most Don’t Take Long

Source: LPL Research, CFRA, FactSet 04/09/25
A bear market is when a stock index or security closes 20% or more below a 52-week high. For this analysis, we take liberty with this and included 19%.
Disclosures: All indexes are unmanaged and cannot be invested into directly. Past performance is no guarantee of future results.
The modern design of the S&P 500 Index was first launched in 1957. Performance before then incorporates the performance of its predecessor , the S&P 90.

Bull Market Duration Outshines Bears  

Bull markets, on the other hand, are generally much longer compared to bears. The duration of a bull market has averaged 61 months, excluding the latest bull market which is about 30 months old. The shortest lasting a whopping 21 months (March 2020 to January 2022) which is nearly twice as long as the average bear market, while the longest hung on for nearly 11 years, or 131 months, from early 2009 until the COVID-19 bear market in 2020. 

Unfortunately, all bull markets eventually end, and this one will be no different. However, consider how likely stocks are to rise over longer time periods. Over 90% of rolling 3-year S&P 500 returns have been positive since 1950, and after big drawdowns those odds approach 100%. As such, with tariff uncertainty continuing to weigh on sentiment and drive volatility, these pullbacks may create opportunities, in due time, for investors to enhance returns by acquiring stocks at discounted prices.  

Conclusion 

Markets have picked up on some indicators that suggest most of the tariff-driven selloff may be behind us, such as capitulation levels in total market volume and Wall Street’s “fear gauge,” the CBOE Volatility Index (VIX), as well as washed-out breadth readings across the S&P 500. Risk sentiment remains under the heel of tariff developments and elevated volatility is likely to stick around. But, at these levels, markets don’t need much good news to spark a turnaround; we just need the news to be less bad.  

The LPL Research Strategic and Tactical Asset Allocation Committee (STAAC) remains neutral toward equities overall, and we continue to monitor price action while considering opportunities to add risk.