Notes on a Bear Market Anniversary

19 years ago today, a bear market began—a classic wallop. 24 years ago today, another ended. That bear market started in 2000, when the 1990s bull market ran out of wall of worry to climb. What better time to explore timeless bear market principles, especially with worries about euphoria and overheating markets in headlines?

For a refresher, bear markets are typically deep, fundamentally driven declines of -20% or worse. They usually last a long while (but not always, see COVID). They aren’t like corrections, which are short, sharp, sentiment-driven pullbacks of roughly -10% to -20%. Those downturns are normal and healthy during bull markets, rebuilding the wall of worry. They can happen for any or no reason. They come and go quickly, often straight off of a market high.

Bear markets generally begin in one of two ways: the wall or the wallop. The wall refers to bull markets’ proverbial wall of worry. At its top, investors are broadly euphoric and lose sight of risk. They miss or dismiss deteriorating fundamentals. Results can’t match their high hopes. There is no more wall of worry to climb. Stocks slide down a slope of hope as disappointment snowballs—gradually at first, then awfully. The 2000 dotcom bubble’s implosion is a classic case.

The wallop is a huge but little-noticed negative shock destroying trillions of dollars of output—driving global recession. 2020’s pandemic-induced shutdown is one example. So is 2007 – 2009’s global financial crisis. A wallop doesn’t mean the bear hits hard straight away. They usually roll over gradually. Wallops simply truncate bull markets before euphoria arrives.

One of investors’ biggest challenges is staying disciplined and not reacting to bull market headfakes. Scary-sounding headlines can sound like wallops. Pro tip: If they dominate headlines, they likely lack negative surprise power over stocks. 2026 features plenty of examples. High oil prices haven’t crimped economic activity. Inflation? Markets long since moved on. Fed rate hikes? Not great but not bull-market killers. Regional wars are tragic but unlikely to derail global growth. Extreme weather typically doesn’t rain on stocks’ parade. Natural disasters don’t cause market crashes, either.

Past bull markets featured many scary-sounding possible wallops. Remember concerns of Chinese debt causing a “hard landing” a decade ago? Or Brexit supposedly dooming UK markets? Even the eurozone debt crisis didn’t cause a global bear market. European stocks sagged, but the world eventually pulled them along.

We don’t dismiss these stories or their implications. But true wallops have surprise power—lots of it. This year’s scary headlines are widely discussed. Their ability to shock is next to nil.

So what about the wall? Some worry accelerating US money supply and AI enthusiasm are causing the economy to overheat, inflating a 2000-like bubble. They see euphoria in leveraged ETFs, the data center buildout and AI companies’ lofty goals. While we see things to watch, for now, the concerns look overstated.

A proper comparison with 2000 shows why. At that time, sloppy initial public offerings (IPOs) surged. These companies weren’t profitable. Investors didn’t care, as they could see only sunshine (and big returns) ahead. As IPOs grabbed eyeballs, overlooked Fed rate hikes inverted the yield curve, which hurt credit availability. Euphoria blinded investors.

Today’s environment isn’t the same. There are cases of nascent euphoria, especially surrounding AI. But sentiment isn’t universally optimistic. Bubble warnings remain common. Weak IPOs clogged the pipes. The slop frenzy isn’t here, at least not yet. Recession warnings are up. No one says AI means permagrowth. Many see it as something to fear. The yield curve has actually steepened. The global economy is growing at a fine pace. Expansion isn’t gangbusters, but there aren’t signs of recession, either. Now, that could reverse as midterm angst fades. But today, broad euphoria seems absent.

Trying to avoid a bear market is one of the biggest risks investors can take. Wrongly trying risks missing big bull market returns. That can be a major setback for investors’ ability to reach their long-term goals. If you are going to do so, we think it requires a well-thought reason few or no others see. Alternatively, when weighing whether to own (or keep owning) stocks, you can’t wait for clarity or positives, as October 9, 2002—a bull market that lasted for five years—illustrates. Four years ago this Monday, markets retaught that lesson.