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MINNEAPOLIS– On Monday, the S&P 500 fell to 3,750, putting it firmly in a bear market. It is not an official stock market term, but rather an arbitrary marker as investors worry about the future.

So what is a bear market? Good question.

“A bear market basically means a crazy market,” says Murray Frank, professor of finance at the Carlson School of Management. “That means the market is down 20% or more from a recent high.”

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A bear market occurs every three to four years, on average. There have been ten since the end of the Second World War.

The last one took place in early 2020 – at the start of the coronavirus pandemic – and was relatively short-lived. It only lasted 33 days. A bear market that occurred during the 2008 financial crisis lasted for a year and a half. The bear market during the bursting of the dotcom bubble of 2000 lasted two and a half years.

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Frank says the average bear market lasts about 9 months, but it takes much longer to recover what has been lost.

“If the next few years are average, you’re probably looking at 3-4 years to come back,” he says. “But it’s not a guarantee, it’s a long-term average.”

Bear markets are not always followed by a recession, but it has happened about 75% of the time.

In the average bear market, stocks lost about 35% of their value.

“Right now, the last time I looked, it was 21%,” says Frank. “If this was an average bear market, we still have a long way to go before we hit bottom.”

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