The stock market makes people uneasy.
When it’s down, we fixate on the red ink, smaller account values, and gloomy headlines—forgetting the market’s typical generosity. When it’s up, we fixate about the next market crash, either because the last one left scars or the negative headlines are too much.
That brings us to today’s market, which offers reasons to worry as it powers higher. Lofty valuations with late 90’s tech boom parallels. The economy slowing down if the weaker job numbers don’t reflect a new labor paradigm. Tariffs and a government shutdown. Fed independence being questioned. Debt and deficit concerns. And social media feeds aren’t exactly uplifting.
So am I surprised the market’s doing well?
Nope.
That’s what stocks do. Since the S&P 500 was reconstituted in 1957, its calendar year returns are positive 78% of the time, and the average positive return year is ~19%.
Markets don’t crash—until they do – and investors dread those times. So, let’s review the last four and see if there’s anything to learn about avoiding the next one.
Bear Markets
There have been four bear markets during my career. The first came when the tech bubble burst in early 2000, sending the market down 49%. Then came a 57% drop starting in late 2007 as the housing bubble gave way to the Great Financial Crisis. COVID-19 triggered a 33% slide, and the 2022 rate‑hike cycle knocked stocks back 25%.
So, four in total — enough to learn from, but not to assume we’ve seen it all.
The Tech Wreck
Our first bear began with a tech-driven stock market bubble many liken to today’s market. I shared a note recently from a growth manager warning about lofty sector valuations, drawing dot-com parallels, and suggesting the ride could soon end badly. This doesn’t justify turning bearish.
All-time highs lead to more all-time highs, and current valuations reveal little about what stocks will do over the next year or two.
You may remember Alan Greenspan’s irrational exuberance quote. It sounds prophetic until you realize he said it in 1996 and the market peaked in 2000.
Being early is the same as being wrong here.
The Great Financial Crisis
The next bear market also started with a bubble—this time in real estate.
Maybe if you could reliably spot bubbles, you could sidestep every market drop?
Unlikely.
It’s impossible to consistently pull off. Good investing demands a repeatable process, and I haven’t seen one built around bubble-spotting.
If you were lucky enough to call the Great Financial Crisis, you probably had a book written about you—and maybe even a movie based on it. But those stars were mostly one-hit wonders. Expecting them to stay on top would be like expecting Lou Bega to keep turning out classics just because he gave us Mambo No. 5 twenty-six years ago.
COVID-19
That brings us to the COVID bear market. You could’ve avoided it if you’d predicted a global pandemic in February 2020, but even if you had a crystal‑ball to use once, would you have used it then? The drop lasted only 34 days and stocks were up 18% that year.
2022
The market kept ripping higher until our most recent bear market triggered by the Fed’s extraordinarily aggressive rate hikes to fight inflation. Since then, rates have eased and we’re now in a cutting cycle, leaving little for the would‑be market timer to hang their hat on.
Final Thoughts
Negative headlines and familiar worries rarely rattle markets as much as unexpected surprises. If you have genuine expertise in a specific area—like a real estate investor studying mortgages in 2006—then use that edge. If you don’t, stay the course and trust that your short-term loss driven by a market crash won’t turn into a permanent one.
It’s fine to trim stock holdings in an upmarket. We entered the year a bit underweight U.S. stocks so we could allocate more to international and fixed income. But when people talk about market moves, they’re usually focused on much bigger shifts that lead to classic investment mistakes.
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