Declines and Rebounds

Top 10 Worst Declines and Rebounds Within One Year*

                    Decline Rebound 
Sept. 1929-July 1932 -89.5% +172.2% 
Mar.  1937-Mar. 1938 -50.2%  +63.0% 
Jan.  1973-Dec. 1974 -46.6%  +56.0% 
Sept. 1939-Apr. 1942 -41.3%  +48.3% 
Aug.  1987-Oct. 1987 -41.2%  +35.8% 
Jan.  2000-Oct. 2002 -38.8%  +36.9% 
Dec.  1968-May  1970 -36.9%  +52.7% 
Nov.  1961-June 1962 -29.2%  +39.7% 
Sept. 1976-Feb. 1978 -27.7%  +22.3% 
Feb.  1966-Oct. 1966 -26.5%  +29.4% 
Current bear market   
Oct.  2007-Oct. 2008 -44.5%**

AVERAGE REBOUND +55.6%

*Based on Dow Jones Industrial Average. Index is property of Dow Jones & Company.
**Date of this study is 10/26/08.

-- from Zacks.com email ad

(So assuming that this time isn't different, we should be expecting about a 50% bounce from the lows of this bear market.)

* * *

[11/22/08] Between 1926 and 2008, the U.S. experienced 16 corrections or bear markets — periods of at least six months during which the S&P 500® Index fell 10% or more. During the 15 historical bears (excluding the one still unfolding), the market declined an average of 28% and the bears averaged 13.6 months.

Yet, when those 15 bear markets ended, the stock market bounced back, typically in short, powerful bursts. As the “Bear Market Recoveries ...” table shows, an investor who was fully invested in the stock market when the bear markets ended could have enjoyed an average return of 45% in the year after the bear market—but much less if he or she’d been holding cash for even short periods.

Missing those periods of explosive growth would have seriously damaged a portfolio’s long-term return. Over the 12 months starting in July 1932, the S&P 500 had three months when it was up more than 38%. And it rose nearly 17% in October 1974, 41% from January through June 1975, and 21% from March through August 2003.