Learning from History: Summary and Insights of the Past 50 Years of Bear Markets in the US Stock Market

Written by: Lord William

Under Trump's extreme trade policies, Russell and Nasdaq have successively entered a bear market;

I have summarized the reasons, declines, and bull-bear turning points of the U.S. stock market during the various bear markets (a drop of more than 20% from the peak) over the past 50 years.

1973-1974 Bear Market

Time: January 1973 – October 1974

Decline: approximately -48% (S&P 500 )

Reason:

Oil Crisis (First Oil Crisis, 1973 OPEC Embargo)

High inflation + Stagflation

Federal Reserve tightens monetary policy

Nixon administration scandal ("Watergate")

Bull-Bear Turning Point:

Oil prices stabilize, the Federal Reserve relaxes monetary policy, President Ford takes office.

1980-1982 Bear Market

Time: November 1980 - August 1982

Drop: approximately -27%

Reason:

Chairman Paul Volcker's radical interest rate hikes to curb inflation raised the federal funds rate to 20%.

The economy has fallen into a deep recession.

High unemployment rate and decline in corporate profits

Bear-Bull Turning Point:

The Federal Reserve begins to cut interest rates, inflation peaks ( August 1982)

Black Monday in 1987

Time: August 1987 - December 1987

Decline: approximately -34% (S&P 500)

Reason:

Technical sell-off triggered by automated programmatic trading (portfolio insurance)

Concerns over rising interest rates and trade deficits

The fluctuation of the US dollar is linked to the global market.

Bull-Bear Turning Point:

The Federal Reserve quickly injects liquidity and intervenes in the market again.

1990 recession bear market

Time: July 1990 - October 1990

Decline: approximately -20%

Reason:

The First Gulf War triggered a surge in oil prices.

The United States enters a mild recession.

Commercial real estate crisis + bank credit tightening

Bull-Bear Turning Point:

After the outbreak of the Gulf War, market expectations turned optimistic (quick victory)

2000-2002 Technology Bubble Burst

Time: March 2000 – October 2002

Decline: approximately -49% (S&P 500), Nasdaq over -78%

Reason:

The valuation bubble of internet technology stocks has burst.

The 911 terrorist attacks in 2001 brought uncertainty.

Declining corporate profits and a crisis of confidence

Bear-Bull Turning Point:

Nasdaq valuation reset completed, Federal Reserve continues to cut interest rates

2007-2009 Global Financial Crisis

Time: October 2007 – March 2009

Decline: approximately -57% (S&P 500 )

Reason:

Real estate bubble burst

Subprime mortgage crisis → Lehman Brothers bankruptcy

Global credit freeze, banking crisis, Federal Reserve forced to rescue the market.

Bear-Bull Turning Point:

In March 2009, the Federal Reserve launched QE 1 + fiscal stimulus.

2018 Bear Market

Time: October 2018 – December 2018 (Trump's first term)

Decline: Approximately -34%

Reason:

Trump escalates the China-U.S. trade war, the Federal Reserve raised interest rates four times that year, and there are contradictions between the White House and the Federal Reserve.

Bear-Bull Turning Point:

In January 2019, the Federal Reserve shifted to a dovish stance, pausing interest rate hikes and suggesting a more flexible policy.

2020 pandemic bear market

Time: February 2020 – March 2020 (the fastest bear market in history)

Decline: approximately -34%

Reason:

The COVID-19 pandemic has triggered a global economic lockdown.

Supply chain disruptions + business shutdowns

Panic sell-off + Initial policy lag

Bear-Bull Turning Point:

On March 23, 2020, the Federal Reserve announced unlimited QE + the fiscal rescue plan.

2022 Interest Rate Hike Bear Market

Time: January 2022 - October 2022

Decline: S&P about -27%

Reason:

High inflation (CPI as high as 9.1%)

The Federal Reserve has significantly raised interest rates (the benchmark rate increased from 0 to over 4.5%).

Valuation compression of technology stocks and soaring bond yields

Bear-Bull Turning Point:

October CPI falls, Federal Reserve hints at slowing interest rate hikes ( Q4 2022, Silicon Valley Bank collapses

Summary

1. This bear market is similar to the two bear markets during Trump's term, both being fast bears, and after the last two bear markets, there was a V recovery.

2. A "event" is needed to signal the bottom of a bear market.

respond

1. Do not use leverage during a downtrend on the left side;

2. Ensure that you will not get liquidated even if the S&P falls by 57% (and falls another 40% from the current level);

3. Don't get overly excited on the left side, buy in batches, only index funds can be purchased;

4. Prepare the funds that can be called upon and get ready to increase your position on the right side;

5. Buying on the right side requires patience to wait for the trend reversal "event" and technical patterns.

Important "events" or "signals"

1. The possibility of Trump delaying the implementation of additional reciprocal tariffs - 30% chance within next week;

2. The EU's formal response on reciprocal tariffs - there is a 50% chance that it will follow the compromise made by the UK and Southeast Asia within the next week;

3. Further escalation or easing of US-China tariffs - Between April 7 and 15, Trump is drooling over Tiktok, there should be something to talk about;

4. Buffett's market timing - On May 3, there should be signals at the Omaha shareholders' meeting;

5. The Federal Reserve's attitude towards market rescue - it is impossible in the short term, but if it continues to deteriorate, it may be possible from May to June.

If negative "events" occur, continue to wait; if positive "events" occur, you can increase your position!

Finally,

The foundation of America's technology, military, and dollar hegemony, which Trump squandered over four years.

The bear market breeds great opportunities; first survive, then patiently wait for the all-out strike!