Bear market dos and don'ts

What’s a bear market?

On April 7, when the United States announced new trade tariffs, stocks fell by 17.6% from their recent high on February 19, as measured by the S&P 500 Index.¹ While U.S. stocks were close to a bear market, they technically avoided one. A bear market is generally defined as a decline of 20% or more in the value of stocks or other financial assets from their recent peak. Bear markets happen when investors react negatively to events like a slowing economy, a global crisis, lower corporate profits, or significant policy changes. Investors generally lose confidence and rush to sell their assets, which causes a drop in the price of securities, like stocks. 

How long does a bear market last?

While bear markets can be unsettling, historically, they’ve been usually short-lived and followed by longer growth periods. For example, in the first 10 months of 2022, U.S. stocks were in a bear market, with the S&P 500 Index down 25% due to high inflation, rising interest rates, and other factors. But, by the end of 2023, stocks posted gains of 20% or more—entering a so-called bull market—which lasted 15 months.²

While you can’t predict when a bear market will end, it happens when investor confidence returns, usually after positive news. For example, when the United States put a 90-day hold on its trade tariffs on April 9, stocks rebounded. And while stocks may rally briefly after posting double-digit losses, it doesn’t mean that the market downturn is over. Several factors may be needed for a sustained market recovery, including improved investor confidence, positive economic outlooks, and optimism surrounding the issues that bothered investors in the first place.

Dos and don’ts in a bear market

Because bear markets are unpredictable, there’s no perfect way to protect your investments. But don’t let uncertainty lead you to do the very thing that you shouldn’t do—make rash decisions. 

When the markets are declining, try to focus on your long-term goals, understand that periods like this have historically been temporary, and position yourself for when the market recovers.

What you shouldn’t do—the knee-jerk reaction

A common mistake during a downturn can be to react in the moment by selling off your investments. While the temptation to limit your losses may be strong, selling at the wrong time can lock in those losses, and you can miss out on opportunities for gains once stock prices rise.

Selling at a loss in a bear market isn’t likely to help you reach your goals. However, if you do need to sell for a specific reason, say you need cash in the short term, consider asking a financial professional about what to sell and how much so you can stick to your long-term plan.

What you should do—diversify and balance 

Wherever you’re on your savings journey—at the start, nearing retirement, or already retired—you should consider creating a diversified fund mix.³ This means not only investing in different stocks and bonds but also different investment types and styles that don’t all behave the same way under the same conditions. This way, if one area of your portfolio isn’t working as it should, another area is there to help dampen the effects.

Sometimes certain types of funds don’t react in a bear market as they typically have done in the past. But that shouldn’t change your overall plan. You’re more likely to be better positioned for a market recovery with a diversified mix of funds.³

Consider reviewing your portfolio with a financial professional to see if you need to rebalance your asset allocations to adjust to any recent market shifts and keep you aligned to your retirement goals. 

What you should do above all—be patient 

There are several reasons why time and patience can be your best allies:

• Bull markets tended to last much longer than bear markets. From 1946 to 2024, we’ve had 13 bear markets averaging 13 months long compared with 14 bull markets averaging 54 months long.⁴
• Historically, markets have recovered from a downturn.
• Even if you’re retired, time can be on your side, as your investments are funding your long-term as well as your short-term spending.
• Keep your focus on your goals. Try to ignore the bear that’s threatening in the short term, because it tended to go away in the long term. 

Finally, before making any decisions in a bear market, seek the advice of a financial professional. Together, you can review your investments and goals and make sure you’re as protected as possible and are well positioned for a market recovery.

1 Associated Press, Choe, S., Veiga, A., Wall Street could be headed for a bear market. Here’s what that means, 4/7/25. The S&P 500 Index tracks the performance of 500 of the largest publicly traded companies in the United States. It is not possible to invest directly in an index. 2 Statista, Richter, F., Bear Markets: How Deep is Your Loss?, 4/8/25. 3 Neither asset allocation nor diversification guarantees a profit or protects against a loss. An asset allocation option may not be appropriate for all participants, particularly those interested in directly their own investments. 4 Manulife John Hancock Investment Management, 1/25.