For the last year and a half, investors have enjoyed a booming bull market. The Dow Jones Industrial Average, S&P 500, and Nasdaq are up by a whopping 37%, 48%, and 63%, respectively, from their lowest points in late 2022.
While this is clearly a good thing (as many investors have watched their portfolios flourish), we all know that bull markets don't last forever. Sooner or later, a downturn is coming.
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Historically, the average bull market since 1929 has lasted around 1,011 days, according to data from investment group Bespoke. That's around 2.8 years. But once we account for outliers (i.e. bull markets that lasted much longer or shorter than average), the median length is only around 522 days -- or roughly a year and a half.
Before anyone panics, this doesn't necessarily mean a bear market is going to hit immediately. Here's the good and not-so-good news about where stocks may be headed in the future.
The bad news: The market will always be unpredictable in the short term
Examining historical data can be an interesting way to estimate how long these surges and slumps might last. Ultimately, though, when it comes to the market's short-term performance, it's anyone's guess what stocks might do.
There are countless factors that affect stock prices, including investor sentiment. If many investors are worried that a bear market is looming and a significant number of them choose to pull their money out of the market, it could cause a dip in stock prices. That could then cause even more concern among investors, resulting in an even greater dip -- and so on.
Other factors like inflation and general financial hardship can also affect the market. When investors have less discretionary income to spend on stocks, it can result in a market slump.
These types of factors can be incredibly difficult to track, which makes predicting the market's short-term performance nearly impossible. In some cases, even the experts are wildly off the mark.
Case in point: Economists far and wide were predicting a recession to hit in 2023, with some even warning that the market could experience a 2008-level downturn. In reality, though, the market spent most of 2023 inching closer to its new all-time high. If you had pulled your money out of the market in 2022 in fear of a recession, you would have missed the early stages of this bull market.
In short, nobody knows when the next bear market will begin, and trying to predict where stock prices will be in a few weeks or months is generally fruitless.
The good news: Bull markets are generally much longer than bear markets
Again, historical returns don't always predict future performance. But one positive trend when it comes to previous bull and bear markets it that the good times generally last far longer than the bad.
The median length among bull markets since 1929 is 522 days, according to the Bespoke data, while the median bear market lasts just 240 days.
Also, bull markets appear to be lasting longer in more recent history. Among all bull markets within the past 50 years, five out of the eight lasted at least 1,000 days. In fact, one of the longest bull markets in history was the one between 2009 and 2020, going on for a whopping 3,999 days -- or nearly 11 years. Meanwhile, the longest bear market lasted 630 days, between 1973 and 1974.
Again, this doesn't necessarily mean we'll never face an extraordinarily long bear market. And when bear markets do occur, they're scary and can wreak havoc on investors' portfolios and financial security. But even the worst bear markets are only temporary, usually lasting less than a year before the next bull market begins.
What you can do right now to protect your money
The unpredictable nature of the stock market can be daunting, especially if you're worried about a downturn looming. But it's simpler than you might think to keep your money safer.
While your portfolio may suffer during a bear market, you won't actually lose any money unless you sell your investments. If you simply hold your stocks until prices rebound, your portfolio will likely bounce back and you'll be no worse for wear financially.
One of the easiest ways to survive any bear market, then, is to take a buy-and-hold approach: Buy solid stocks from healthy companies, and then hold them for as long as you can. They may take a hit during a market slump, but that's normal. Solid stocks are far more likely to survive, rebounding when the next bull market begins.
It's impossible to say precisely where the market is headed throughout the rest of 2024 and 2025. But with the right portfolio and a long-term strategy, you can rest easier knowing your money is as protected as possible.
