Significant Changes After 2010
Over the years, the behaviour of the stock market has undergone substantial changes. Analyzing data from the 1980s to the present (see image below) reveals a clear shift in the frequency of bear markets. In the 1980s, the market was in a bear phase only 14% of the time. This decade was strong for India, with many multinational companies active and overall economic growth. Troubles only began towards the late ’80s, culminating in the 1991 crisis, when India had to pledge gold to stabilize its economy. Despite these challenges, bear markets were infrequent during that decade.
Bear Markets Dominated the 1990s and 2000s
In the 1990s, the situation changed dramatically. More than half the decade, approximately 52% was spent in a bear market. Although the market experienced a significant rally in 1992, it did not reach those highs again for many years. The 2000s mirrored this trend. The early part of the decade witnessed the bursting of the dot-com bubble, and while there was a good run from 2003 to 2008, the global financial crisis eventually brought it down. Once again, over 50% of this decade was spent in a bear phase.
A Calm Period After 2010
Starting in 2010, the trend shifted dramatically. The market became more stable. Between 2010 and 2015, there were no major highs or significant lows. A minor drawdown occurred in 2017-18, and again in 2020 due to the pandemic. Overall, during the 2010s, only about 6% of the time was spent in a bear market. In the 2020s so far, this figure has decreased even further—to just 4%.
A Whole Generation Hasn’t Experienced Real Pain
This prolonged period of stability has resulted in many market participants never experiencing a true bear market. Anyone under 40 years old today has mostly witnessed bull markets, or at the very least, has not endured the painful, long-term declines typical of previous decades. Their understanding of a ‘bad market’ is largely based on short-term drops rather than deep or lasting crashes.
Is This the New Normal?
Determining whether this is a permanent shift is challenging. Some believe that the sustained performance of markets is a result of easy money, central banks printing money and injecting it into the economy every time there is a crisis. This trend was evident in 2008, continued through 2020, and expanded during the COVID-19 crisis. Consequently, markets rebound quickly. However, whether this situation is natural or healthy remains up for debate.
What are your thoughts on this shift in market cycles? Do you believe bear markets are truly fading away or just waiting to return? Share your views in the comments below! If you found this blog helpful, please SHARE it with your friends!
