What Happens in Recession
When a recession comes in the US, the stock market often falls a lot. These periods have been seen many times in the past. Each time, the market goes down from its top level. These falls are not small. Sometimes the drop is very big and happens again and again in history.
How Much the Market Falls
The market has seen many strong declines. In some cases, it has fallen by 80%, in others by 60%, 40%, or even 20%. During the 2008 crisis, the fall was also very deep.
These big drops show that market falls are normal and can happen at any time.
Why People Get Scared
Every time the market falls, many people believe that it will never come back. This fear spreads quickly. Because of this, most people exit the market at the wrong time. They feel the bear market will stay forever, so they choose to stay away.
What History Shows
In the last 100 years, around 14 such major falls have been recorded. On average, the market dropped about 40% during these times.
These declines lasted for about 20 months on average. Some were shorter, and some lasted longer, but the pattern stayed similar.
The Big Comeback
After every fall, the market has always come back stronger. The bull market that follows has given an average gain of around 163%. In some cases, gains were 50%, in others 200%, and even up to 400%. These good times lasted for about 52 months on average.
What This Means for You
There is no need to fear a bear market. It is a normal part of the market cycle. In fact, it is a step before the next bull market begins. If you understand this, you will not panic during market falls. Instead, you can stay ready for the next big opportunity that comes after it.
