Investor anxieties are running high. Stock indexes are running low. I smell a bear market. Before we run and hide, let's take a look at what we need to know about this furry critter.

What is a bear market? There's no official definition, but most market watchers reserve the label for a 20% decline from a recent peak in a major index. For example, the S&P 500 hit an all-time high on October 9th last year. Exactly nine months later, on July 9th, the index closed 20.5% below the previous high, bringing the bear out of hibernation. However, when an index reaches the bear level, we measure bear market statistics from the previous high. In other words, the current bear, identified in July, actually came out of hibernation nine months ago.

What marks the end of a bear market? Like its beginning, the end of a bear market can only be identified in retrospect, typically after the market has a sustained rise above 20%. We would say that the bear went back into hibernation at the beginning of that 20% rally. The word "sustained" is critical. The bear market following the tech bubble saw the S&P 500 lose nearly half its value over 30 months. However, about 18 months into the bear market, after declining 36.8%, the index rose 21.4% before reversing direction and falling to its ultimate 49.1% decline. That nasty market had bear rallies of 19%, 21.4% and 17.5% before a true bull market resumed.

Do all bear market follow the same pattern? Using the S&P 500 as our benchmark, the current bear market is the ninth since 1950. We can determine some averages, but no two are alike. The average length has been about 15 months with an average decline around 33%. However, by the time the decline reaches the 20% threshold, the average bear market is already about 70% through its lifespan with only about 13% more to downside. But the range of lengths, declines, and contours is considerable, as these bear snapshots illustrate. For example, the 1956-57 bear was close to the average length, but index slumped below the 20% mark for only two days! The bear market of 1987 was the closest to the average bear decline, but it was by far the shortest, lasting a mere 15 weeks. Of course it including a one-day crash of 20.5%, now immortalized in market history as Black Monday. The longest and deepest decline is still a vivid recollection for many of us. It was the 30-month volatile ride in 2000-02.

Bear Markets in the S&P 500 Since 1950
Previous High	Bear Start	Bear Bottom	Total Decline	Months to -20%	Months after -20%	Total Months
2-Aug-56 49.64	21-Oct-57	22-Oct-57 38.98	-21.5%	14.6	0.1	14.7
12-Dec-61 72.64	28-May-62	26-Jun-62 52.32	-28.0%	5.5	0.9	6.4
9-Feb-66 94.06	29-Aug-66	7-Oct-66 73.2	-22.2%	6.6	1.3	7.9
29-Nov-68 108.37	29-Jan-70	26-May-70 69.29	-36.1%	14.0	3.8	17.8
11-Jan-73 120.24	27-Nov-73	3-Oct-74 62.28	-48.2%	10.5	10.2	20.7
28-Nov-80 140.52	22-Feb-82	12-Aug-82 102.42	-27.1%	14.8	5.6	20.4
25-Aug-87 336.77	19-Oct-87	4-Dec-87 223.92	-33.5%	1.8	1.5	3.3
24-Mar-00 1,527.46	12-Mar-01	9-Oct-02 776.76	-49.1%	11.6	18.9	30.5
9-Oct-07 1,565.15	9-Jul-08	?	?	9.0	?	?
AVERAGES			-33.2%	9.9	5.3	15.2

Would a strong allocation to international equities help me through this market downturn? A diversified allocation strategy with a healthy share of international stocks is highly recommended regardless of the market direction. This particular bear, however, isn't showing much favoritism. Not only have all the major U.S. indexes dipped below 20%, but most international markets are is roughly the same shape. For example, the Vanguard Total International Index (VGTSX), which hit an all-time high on October 31 last year, dropped into bear territory on July 9th, the same day as the S&P 500.

Is there a silver lining to this gloomy scenario? The good news is that the bear spends most of his time in hibernation. Since 1950, these 20% plus declines have accounted for a bit less than 19% of the total market calendar. In other words, over 80% of the time, we're in a bull market. And those bull market advances dramatically surpass the bear declines. In contrast to the average 15 month and 33% decline of bear the markets since 1950, the eight bull markets have averaged over five years in length and 166% in gains.

What should I do to weather the current bear market? For openers, don't obsess over the financial news. Change the channel! Seriously, tune out CNBC, Bloomberg, or Fox Business News. These programs are financial porn targeted to the "fast money" crowd. They're not relevant to long-term investors.

You should remain calm and avoid the urge to reduce your equity exposure. By the time the market has declined 20%, selling equities is usually a losing proposition. If you omit the two worst declines, the average bear only lasted 2.2 months after reaching the 20% mark and only dropped an additional 8%. Moreover, if you sell in a panic, then you face the further problem of trying to guess when to buy back in.

If you're decade or more from retirement and making regular contributions to your retirement, guess what? You should welcome bear markets. They offer the opportunity to buy equities on the cheap.

If you're retired or nearly there, keep a minumum of five years of retirement withdrawals in fixed-income investments (CDs, money markets, bonds, etc.), and make your withdrawal exclusively from these sources when the bear is roaring. This strategy ensures that you have enough income to avoid selling stocks when the market is down.

Finally, you must understand that the occasional bear is normal market phenomenon, one that makes the next bull market such a welcome experience.