Corrections and Bear Markets

Written in March 2025, when the S&P 500 had just entered correction territory, this paper asks the question every investor faces in a fall: is this a normal correction, or the start of a bear market?

It brings together the historical record on how often corrections become bear markets, how deep and long each usually is, what caused the most recent bear markets, and the economic and market indicators that tend to come before a prolonged downturn.

Key findings

• Since 1929 the S&P 500 has had 56 corrections, of which 22 (around 39%) turned into bear markets. Since the Second World War, roughly 25% have.
• Corrections that do not become bears have averaged a fall of about 14% and around four months from peak to trough.
• Bear markets have historically averaged declines of roughly 35% to 38%, and the median bear market takes about 10 months to find a bottom.
• The 2022 bear market saw the S&P 500 fall 25.4% between 3 January and 12 October 2022, driven by inflation and rapid interest-rate rises.
• Warning signs that raise the odds of a bear market include recession, high inflation and rising rates, an inverted yield curve, falling corporate earnings and extremes in investor sentiment.

What the paper covers

1. Understanding corrections and bear markets
2. How often corrections turn into bears
3. Average depth and duration
4. Timing and causes of the last bear market
5. Duration and recovery: 2020 and 2022 compared
6. Key indicators of a bear market
7. Sources