Measuring the Powerful Bear and Bull

Last Updated Feb 14, 2011 11:13 AM EST

Most of us weren't around in the great depression, which was the last time the US stock market weathered such a powerful bear market. Let's take a look at just how quick and powerful this wild bear was, along with the wild bull that has followed it, using the total return of the total US stock market as measured by the Wilshire 5000 full cap total return. Think of it as the stock market's version of "When Wild Animals Attack."

The great bear market
The U.S. stock market peaked on October 9, 2007. In the subsequent 510 days the market lost a staggering 55.2 percent, bottoming out on March 9, 2009. Legendary icons such as Lehman Brothers disappeared, and AIG and other major banks would have as well were it not for the bailout they received courtesy of us taxpayers. The fury of this plunge put investors into shock and scrambling for a "new normal."

The great bull market
In the 701 days from March 9, 2009 to last Friday, the US stock market has surged upward to the tune of 112.6 percent! While this bull wasn't quite as fast as the great bear, it may yet prove to be more powerful. As it is, the market is within 4.8 percent of the peak before the great bear's path of destruction. Unfortunately, the math works out that a 55 percent decline and a 112.6 percent increase still works out to a 4.8 percent loss.

A picture of the bear and the bull
It's difficult to capture images of ferocious animals making their kill, but here's a picture of both along with some noteworthy statistics.

Warning - Don't Feed Wild Animals
The last bear market started when investors were greedy and feeding the bear with the paradigm that real estate could never go down. And the bull started when we were all fearful and feeding the bull with the paradigm that capitalism was dead.

If we weren't so foolish in feeding these two paradigms, neither the bear nor the bull would have been so ferocious. But will knowing that cause us to be any different next time? Probably not. It is more likely that, as we did last time and all the times before that, we will say "this time it's different."

Author's note: My thanks to Wilshire Associates for providing me with so much robust data.

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    Allan S. Roth is the founder of Wealth Logic, an hourly based financial planning and investment advisory firm that advises clients with portfolios ranging from $10,000 to over $50 million. The author of How a Second Grader Beats Wall Street, Roth teaches investments and behavioral finance at the University of Denver and is a frequent speaker. He is required by law to note that his columns are not meant as specific investment advice, since any advice of that sort would need to take into account such things as each reader's willingness and need to take risk. His columns will specifically avoid the foolishness of predicting the next hot stock or what the stock market will do next month.