Wall Street may be heading into another bear market, with renewed fears of inflation and recession triggered by former President Donald Trump’s tariff policies. The Nasdaq Composite and Russell 2000 indexes have already slid more than 20% from recent highs, officially entering bear territory.
Now, attention is turning to the S&P 500, which remains just under the threshold. If it falls further, it would confirm a 2025 bear market, only three years after the last major crash in 2022.
According to AltIndex.com, this could become the second-fastest return to a bear market in the past 50 years—highlighting just how fragile investor sentiment has become in today’s volatile economic climate.
Only the 2022 Crisis Was a Faster Follow-Up
Bear markets don’t happen very often, with the S&P 500 suffering just eight such drawdowns over the past 50 years. However, a new trend seems to emerge, with these negative market movements happening much faster.
According to Statista, Goldman Sachs, and Yahoo Finance data, before 2020, bear markets typically appeared every seven to thirteen years. One of the most challenging bear markets in recent history occurred in 1973, with a staggering 48% drop. This downturn lasted 21 months, but it took an excruciating 69 months for a full recovery, much longer than any other market rebound. The next bear market happened seven years later. However, the 1980 market crisis brought a much smaller 27% drop and lasted for 20 months, with only 3 months of recovery.
The following years saw a similar trend- bear markets occurred every seven to ten years, with the 1990 crisis as the only exception and a relatively short three-year gap. However, the extent of the losses multiplied. The 49% drop during the 2000 dot-com crash was followed by an even more dramatic 57% slump in the 2007 financial crisis, the worst the stock market had faced in 50 years.
While the more recent market crashes from 2020 and 2022 brought smaller losses of 34% and 25%, respectively, the speed and frequency of bear markets changed. The COVID-19-driven, turbulent bear market of 2020 was the shortest in history, with the S&P 500 index plunging 34% in a single month.
The 2022 bear market, driven by peak inflation in the United States and the Federal Reserve’s historic interest rate hikes to combat rising prices, was less severe in terms of losses but marked the quickest follow-up in half a century. Just three years later, history is repeating itself, with the market on the brink of a new crisis.
Why are Bear Markets Happening Faster Than Ever?
Before 2020, the average gap between the two bear markets was 7.8 years; now it’s just 6.5 years, and there are several reasons behind this trend. Growing trade tensions, like the recent “Liberation Day” announcement, are fueling fears of global economic slowdowns, leading to increased market volatility. Also, rapid shifts in monetary policy, including sudden interest rate hikes can trigger widespread sell-offs. Finally, global markets are closely connected, so problems in one country can quickly shake investor confidence worldwide and lead to more significant market declines.