At all times — but especially during uncertainty — it’s important to rely on history and evidence when making investment decisions. Let’s consider 250 years of U.S. economic history. We’ve experienced roughly 100 bear markets. A bear market is defined as a 20% decline from a market peak and, on average, they last about 6.5 months.

There are many strategies designed to prepare for bear markets, but none have consistently improved long-term investment results. In fact, more money is typically lost trying to avoid bear markets than in the bear markets themselves. The best approach remains sticking to a well-designed plan.

You may have heard the terms “V-shaped” or “U-shaped” recovery. These describe recessions, not bear markets. Bear markets typically follow a “W” pattern: a sharp decline, a strong recovery, followed by another unsettling drop — often without any change in the underlying positive evidence. This second dip often unnerves investors who missed their chance to panic the first time. Today, computer-driven trading can amplify these swings.

What causes bear markets? Not always recessions. Some have been driven entirely by algorithmic trading. Others are fueled by exaggerated fears over a single issue. It usually takes multiple, compounded mistakes by multiple organizations to turn a bear market into a recession. Of the 100 bear markets we’ve seen, only 50 were associated with recessions.

In a recession, markets can significantly overstate the economic reality. For example, in the 2008 – 2009 bear market, the S&P declined 52.2%, but GDP only fell by 2.537%. That’s a relatively modest decline to recover from. Today, we’re already seeing signs of economic improvement.

This recession was triggered by multiple COVID-related disruptions. While the bad news is well publicized, what’s less appreciated is the surge in innovation — both medical and economic — that will likely defeat the virus faster than expected. Government and public pressure will likely accelerate the approval of new treatments.

We’ve been slow to adopt some of the most successful international strategies. That said, Hawaii offers a fascinating case study: despite having early exposure through cruise ship and air evacuations, the state saw just 17 deaths out of a population of 1.47 million. Many of those were hospital workers or patients evacuated from elsewhere. There’s much we can learn from Hawaii’s response.

Lastly, here’s a piece of good economic news: politicians and economists from all sides are embracing an idea long debated — growth creates a bigger pie for everyone. This shift toward prioritizing growth could unlock solutions for broader economic challenges.

Katz Family Financial