How Long Does a Market Drawdown Last?

We are in a bear market. How long do drawdowns last?

That is, how many years might it take your portfolio to recover from the current bear market? All we have is history to guide us.

 

How Many Months is the Average Time to Recovery from a Drawdown?

How long do corrections and bear markets last, and how long does it take to recovery?

 

Let’s start simple with averages. Above, you can see the performance and length of Corrections and Bear markets.

For corrections, the average length is four months, and it takes four months more to recover.

Next, Bear markets last 13 months, and recovery from this takes 22 months—call it two years.

Let’s dig in a little more.

 

How Long do Bear Markets Last?

How long do historical bear markets last?

 

Above, you can see 11 historical bear markets since WWII. Some bear markets are extremely short (3 months in ’87, ’90, and even shorter than March 2020).

We all remember the 2000 and 2008 wrecks; they lasted 31 and 17 months. Those were not much fun.

The duration in months (as seen above is from the markfrom et top to the bottom. After that, we still need to get back to breakeven!

So, how long it takes for the market to recover?

 

How Long is the Market’s Drawdown Length?

Next, how long is the recovery period from bear markets?

 

Instead of the duration (which we saw above), let’s now look at the recovery period.

Remember the bear market lasted just three months in ’87 and ’90? Well, how long did it take to get back to zero? That is, how long did it take for the stock market to recover the lost value during the bear market?

You can see 19 months and five months for ’87 and ’90, respectively.

And for 2000? The bear market lasted 31 months but took 55 months (4.5 years) to recover. And in 2007, even though the bear market was shorter (17 months), it took 65 months to recover (5.4 years). The most prolonged recovery is in ’73 at 5.75 years.

So, in summary, on average, it takes about two years to recover, but it may take up to 5 years.

This is, remember, historical data rather than predictions.

 

Drawdown Length

As we are in a bear market and headed toward a recession, we must understand the drawdown length and how long bear markets last.

If you had to guess, expect your portfolio to be below 2021 peaks for another 2-5 years.

Or, might we see another “lost decade” as we did in 2000-2010? Your guess is as good as mine!