ACG Insights: Wrestling Bears

(Download the full report HERE)

Executive Summary

  • Markets thus far in 2022 have dealt with selling pressure that to many investors feels like a shift from the upward momentum experienced over the last several years and post-COVID (Exhibit 1)
  • Equity market declines have felt atypical because by some measures they really have been rare. The S&P 500 is currently in one of its longest weekly losing streaks in decades (Exhibit 2)
  • In percentage terms, the current drawdown is relatively common. The question going forward is if the sell-off turns into a prolonged downturn similar to 2000-2002 or 2008-2009 (Exhibit 3)

  • The largest declines this year have come from speculative areas of the market that saw some of the largest gains during COVID lockdowns. Risk appetites have flipped quickly as attitudes towards high-growth assets have changed (Exhibits 4&5)
  • Valuations have repriced to more normal levels as a result of some of the exuberance that has been removed from markets (Exhibit 6)
  • Short-term risk in equity markets is still elevated due to a number of variables, but probabilities favor long-term stock market investors despite recent volatility (Exhibit 7)

Background: Commencing Countdown, Engines On 

Outside of the COVID-19 sell-off during the spring of 2020 and a couple other blips along the way, markets have been in a state of steady ascent since the Great Financial Crisis in 2008-09. Just a cursory glance at the S&P 500 chart in Exhibit 1 gives a good high-level view of the price appreciation experienced by investors from 2009 to 2020. The appreciation only accelerated after the initial COVID shock. The 200-day moving average line in the chart below is a good proxy to illustrate the longer-term upward momentum of the index over the last decade. The magnitude of the trend has almost felt preordained as it has continued. 2022 thus far has felt like a paradigm shift as markets have turned bearish quickly.

Setting the Stage…

The two charts that follow are helpful representations of the historical significance of the current sell-off to date. One of the reasons volatility has felt so painful this year is simply that it has been sustained relative to recent history. As of May 20, 2022, Bespoke Investment Group shows that the S&P 500 has fallen for 7 consecutive weeks, which is the longest sustained downtrend since 2001.

Broader equity market indexes have also begun to flirt with dreaded “bear market” territory, defined as a 20% drawdown from a recent peak. Whether this definition holds any significance is debatable, but it at least seems to be psychologically important. Exhibit 3 charts similar 20% loss periods along with the prolonged downturns associated with the Tech Bubble and Great Financial Crisis.

The natural question for equity investors from Exhibit 3 is whether this 20% downturn represents an inflection point toward new highs, or if this is the beginning of a period of sustained weakness. The push/pull between these two attitudes is an interesting basis to view recent market dynamics and frame some of the questions going forward…

Download the full report HERE where we discuss

  • Narratives and Changes in Risk Behavior
  • Recent Drawdowns in Speculative Areas of the Market
  • COVID-19 Winners Returning to Earth
  • Where Do We Go From Here?
  • S&P 500 Price-to-Earnings Ratio
  • S&P 500 Rolling Returns


  1. Source: Bloomberg
  2. Source: Bespoke Investment Group
  3. Source: The Wall Street Journal
  4. Source: Charles Schwab:
  5. Source:
  6. Source: Schroders