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Why This Year Feels So Much Worse than Recent Bear Markets

Why This Year Feels So Much Worse than Recent Bear Markets

September 28, 2022

Thank God the stock and bond markets are taking a break today from the incessant losses.  Stocks are rallying strongly today as interest rates fell back a bit.  Hoping this little one day rally can stick. 

So far, the stock market (Dow Jones Total Stock Market Index) is down 24.7% this year. 

Now that is bad, but it isn’t unprecedented.  In fact, the falloff in the early days of COVID was over 33%.   In late 2018, stocks fell by almost 20%.  But somehow, this time around seems much worse for the average investor.  That’s because it is!  In fact, for the average investor in a Balanced Portfolio of 50% stocks and 50% bonds, this year’s return is almost as bad as the losses they would have experienced in the 2008 financial crisis when stocks were down by over 50%. 

How so?  Well, most investors, particularly older investors, are not invested entirely in stocks.  Most follow the age-old advice of diversifying their portfolios – owning stocks and bonds.  Bonds are expected to provide support to a portfolio when stocks falter. So, the average investor did not experience the full brunt of the financial crisis stock losses.  The problem is that this time around, bonds have generally not helped at all.   Consider the following performance metrics: 


Vanguard Stock Market Index

Vanguard Bond Market Index

Vanguard Balanced Portfolio Fund

Jan 2008 – March 2009




YTD 2022





So, if this year feels almost as bad as the financial crisis – that’s because maybe for your portfolio IT IS. 

The good news to be had here is that the interest rates on bond holdings have increased substantially this year.  As interest rates stabilize, portfolios will be generating a lot more dividend income. 

We did learn from the financial crisis that the age-old advice of “stick with your investment strategy” and “don’t try to time the market” and even “be greedy when others are fearful” all worked, even in the worst crisis of our generation.  So, I have no doubt but that all these adages will once again be proven true.