Bear Markets: How Deep Is Your Loss?

The S&P 500 briefly entered bear market territory on Monday, before the index clawed back some of the losses to end the day nearly flat and 17.6 percent below its February 19 high. A bear market is typically defined as a drop of 20 percent or more from and index's latest high - a fate that the S&P 500 avoided, at least for now. On Tuesday, stocks rebounded further, recovering some of the losses incurred after Trump's "Liberation Day" tariff announcement. Hopes of possible tariff deals were enough to stop the selloff for now, but markets will likely remain volatile for as long as uncertainty over future tariffs prevails.

As our chart shows, bear markets are relatively rare occurrences, with the S&P 500 suffering just seven such drawdowns in the past 50 years. The latest occurred in 2022, when inflation peaked in the United States and the Fed was forced to raise interest rates at a historic pace to counter surging prices. With a total drawdown of 25 percent, the 2022 bear market was relatively harmless, though, compared to peak-to-trough losses of 49 and 57 percent during the dot-com crash and the financial crisis of 2008, respectively.