Current Bear Market vs Past 2 Bear Markets

The stock market is in the crapper. Today alone (March 12, 2020) the S&P 500 fell by 10%. That was the second worst day since 1987.

The market is down about 25% from it’s highs. Believe it or not, the market’s all time high was about a month ago.

How far will this go?

I compared the current bear market to the previous two bear markets in 2000-2002 and 2007-2009. As you can see in the chart below, the current bear market (to March 12, 2020) is only about half the depth of the previous two.

    Also, the speed of the current decline is blindingly fast compared to the previous two bear markets. During the last two bear markets it took about 250 days to decline as far as we’ve declined in just 18 days.

    It’s quite unbelievable. The current decline is closer in speed to the crash that happened after the Lehman collapse – which occurred in the middle of the 2007-2009 bear market.

    Given the severity of the coronavirus impact to the real economy, the current bear market might only be half finished. The news flow continues to worsen. Still, over the past couple days I have started to pick away at a number of dividend paying stocks (like RY, TD, BCE, IBM, MMM to name a few). Because you never really know when it’s over.

    I look at it like I’m trading my capital for a permanent and growing stream of income. Yields on some dividend-growers are around 5-6%. Even if the current yield was my only source of return I’d be reasonably happy. However, the stocks I’m buying should continue to grow their dividend over time, raising the yield on my initial investment.

    I’m probably early and the market will continue to decline. As the market declines I’ll continue to buy more. The lower it goes, the more aggressive I’ll get. That means at some point I’ll start shifting my purchases to some of the big tech names that don’t necessarily pay dividends.

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