Bear Market Looms As U.S. Stocks Sink Deeper

Worries over sky-high inflation, a hawkish Federal Reserve, and future economic growth that spurred the stock market's terrible year, threatened to send it into a bear market for the first time since March 2020 on Monday, June 13, 2022, Lewis Krauskopf reported for Reuters.

Photo Insert: The 20% S&P 500 drop would corroborate a commonly accepted definition of a bear market if the index sustains its downward trend through the market's closure.

During Monday's session, the benchmark S&P 500 index plummeted below 3837.248, a drop that put it more than 20% below its record closing high set on Jan. 3. The 20% drop would corroborate a commonly accepted definition of a bear market if the index sustains its downward trend through the market's closure.

If history is any indication, a bear market might entail additional misery for investors. According to Sam Stovall, chief investment analyst at CFRA, the S&P 500 has plummeted by an average of 32.7 percent in 13 bear markets since 1946, including a nearly 57 percent decline during the 2007-2009 financial crisis.

According to CFRA, it takes around a year on average for the index to hit its bottom during bear markets, and then another two years to rebound to its previous high. The return to breakeven levels has taken anywhere from three to 69 months in each of the 13 bear markets since 1946.

Stocks profited from emergency policies put in place to assist stabilize the economy in the aftermath of the COVID-19 epidemic, with the S&P 500 up 114 percent from its March 2020 low.

These gains were reversed at the start of 2022, when the Federal Reserve became significantly more hawkish and announced it would tighten monetary policy faster than expected to combat rising inflation.

It has already raised rates 75 basis points this year, and stock and bond markets have been pushed down by predictions of further hikes to come, notably at the Fed meeting this week.

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