The dreaded S&P 500 bear is nearly here. But don't think you need to hibernate to make money in a rough market.
The S&P 500 Friday plunged to 3,901.36, putting it less than 2% away from 3837.25. That level would mark a 20% drop from the Jan. 3 high. And it puts the risk of a bear market on the table.
But it also turns out that eight stocks in the S&P 500, including health care firm DaVita and consumer discretionary plays NVR and AutoZone, posted strong average gains during past recent bear markets, says an Investor's Business Daily analysis of data from S&P Global Market Intelligence, S&P Dow Jones Indices and MarketSmith. All eight of these stocks posted 50% or higher average gains in the past three bear markets since 2000.
And seeing gains is a welcome sight when the market is on the verge of plunging 20% or more. The S&P 500 is already down 18% from its high on Jan. 3. But if markets soften more, there could be much more downside. The S&P 500 dropped nearly 37% in the past three bear markets, says Howard Silverblatt of S&P Dow Jones Indices. And it plunged nearly 57% in a bruising 30-month bear that finally ended in 2002.
"At the beginning of the year, no one thought that the S&P 500 was headed to bear market territory, but persistent inflation, another Fed policy mistake, and recession fears have unnerved investors," said Edward Moya, strategist at Oanda. "The way the macro backdrop is unfolding, it seems traders will continue to fade any rallies that emerge until the Fed starts to show signs that they are worried about financial conditions and that they may stop tightening so aggressively."
Best S&P 500 Sectors In A Bear
Not surprisingly, there aren't many places to hide during a bear market. But you can still find them.
On a sector level, all 11 S&P 500 sectors dropped during the past three bear markets. And some of the plunges are noteworthy. Tech stocks are the worst. The Technology Select Sector SPDR plunged more than 55% on average in the past three bear markets. That seems to be repeating again this time, with the tech ETF down roughly 25% this year already.
Financials, too, lag in bear markets. The Financial Select Sector SPDR dropped more than 50% in the past three bear markets. So far this year, though, they're only down 16%.
But if you're looking for relative safety, you must dig deeper.
Past S&P 500 Bear Markets
| Bear start | Bear end | Price decline | Months in duration |
|---|---|---|---|
| 9/7/1929 | 6/1/1932 | -86.2% | 32.8 |
| 3/6/1937 | 4/29/1942 | -60.0 | 61.8 |
| 5/29/1946 | 6/14/1949 | -29.6 | 36.5 |
| 8/2/1956 | 10/22/1957 | -21.5 | 14.7 |
| 12/12/1961 | 6/27/1962 | -28.0 | 6.5 |
| 2/9/1966 | 10/7/1966 | -22.2 | 7.9 |
| 11/29/1968 | 5/26/1970 | -36.1 | 17.8 |
| 1/11/1973 | 10/3/1974 | -48.2 | 20.7 |
| 11/28/1980 | 8/12/1982 | -27.1 | 20.4 |
| 8/25/1987 | 12/4/1987 | -33.5 | 3.3 |
| 7/16/1990 | 10/11/1990 | -19.9 | 2.9 |
| 3/24/2000 | 10/9/2002 | -49.1 | 30.5 |
| 10/9/2007 | 3/9/2009 | -56.8 | 17 |
| 2/19/2020 | 3/23/2020 | -33.9 | 1.1 |
Source: S&P Dow Jones Indices
Top S&P 500 Stocks In Recessions
Topping the charts in recent bear markets, on average, is DaVita, a provider of kidney dialysis. The company's patients are suffering from kidney failure, so they can't stop coming just because there's a bear market or recession.
The company's earnings per share rose every year from 2005 to 2016. And earnings only dipped 14% in 2017, before taking off more than 155% from then until 2021. Shares soared more than 200% on average during the past three bear markets. That's entirely due to the stock rising 664.7% in the bear market from March 24, 2000 through Oct. 9, 2002. During that time, the S&P 500 dropped nearly 50%. It's important to note, though, even DaVita fell 31.8% and 23.1%, respectively, in the past two bear markets.
It's a similar story with homebuilder NVR. The stock gained 110%, on average, in the past three bear markets. But that, too, is thanks to a 410% gain in the bear that ended in 2002.
If there's any more consistent standout in bear markets, it's AutoZone, which is a seller of auto parts. During slow economic periods, people hang onto cars longer and need to buy parts to keep them running. That makes the stock popular with fund managers during downturns. Shares of the company gained 64%, on average, in the past three bear markets. It gained more than 200% in the bear ended in 2002 and 22% in the bear from Oct. 9, 2007 through March 9, 2009.
The bear's not here yet. But you'll want to know what you're in for if it arrives.
Top S&P 500 Stocks In Past Three Bear Markets
Based on average gains in those periods
| Company | Symbol | Average % gain over past three bear markets | Sector |
|---|---|---|---|
| DaVita | 203.2% | Health Care | |
| NVR | 110.5 | Consumer Discretionary | |
| AmerisourceBergen | 107.8 | Health Care | |
| CarMax | 90.3 | Consumer Discretionary | |
| AutoZone | 64.3 | Consumer Discretionary | |
| Ventas | 59.7 | Real Estate | |
| Quest Diagnostics | 54.1 | Health Care | |
| Penn National Gaming | 50.0 | Consumer Discretionary |
