I am getting tired of listening to all of the pundits saying that the current decline resembles the 1974 bear or the 1987 bear markets. How about looking at some data! So, I used my TC2007 market price history database to compute how much the Dow Jones Industrial average declined in prior bear markets after the market’s peak.
The results, presented in the table below, are quite revealing and unsettling if one is looking for a near term bottom. I would be interested to learn if you agree with my analysis.
Twenty days after the Dow had peaked, the Dow was down 7-10% in each of these beginning bear markets. By 40 days post Dow peak, the 1987 decline had already bottomed out (-41% by day 39) and rebounded to -26%. The ferocity of the 1929 bear was evident early on, showing a 40% decline by day 40. In comparison, the 1973 and 2007 bears appear puny, registering only 4% to 8% declines by day 40. The 1973 and 2007 bears tracked each other quite closely until 260 days post the Dow peak. By day 260, the 2007 bear was actually showing a greater than the decline that started in 1929 (-40% vs. -38%) and was more than twice the decline shown in the 1973 bear market (-17%). Since day 260, the current bear market has resembled the 1929 bear market closely, with declines being about 14 percentage points smaller. I would conclude then, that the current bear market is tracking much closer to the one that began in 1929 than to the 1973 and 1987 bears.