ETF Winners And Losers During Bear Markets (2024)

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One of the most widely followed stock indices, the S&P 500, began what has now proven to be a bear market on Jan. 3, 2022, as a result of having reached a drop of over 20% on June 13, 2022, when it "officially" became a bear market. A 20% drop in an index is one of the most widely accepted definitions of a bear market. The Nasdaq is also in a bear market.

Many sources give suggestions as to the kinds of stocks and ETFs that are usually most negatively affected by a bear market. However, in this article, I present exact data on how 22 ETFs representing different categories of ETFs actually performed over the last several bear markets. My objective is to identify the best and worst performing ETFs during these periods. But an equally important aim was to show the categories these funds represented, under the assumption that most other funds in the same categories as these funds likely can be thought of as performing similarly.

So, for example, an ETF such as Invesco QQQ Trust (QQQ), a Large Growth ETF, probably performed quite similarly as Vanguard Growth Index (VUG), another Large Growth ETF during bear markets (and outside of them) since both are index funds. QQQ probably performed quite similarly to Fidelity Contra (FCNTX), a non-indexed fund, as well.

If true, this would mean that most Large Growth ETFs and even Large Growth mutual funds, might also show the same kind of performance results during a bear market as other within the Large Growth category. So, if QQQ shows a poor result during bear markets, one can assume other Large Growth ETFs (and mutual funds) would show poor results as well.

Unfortunately, most ETFs have only been in existence for two previous bear markets, with the second one being the very brief one following the onset of Covid 19. However, a few ETFs have been around as far back as early 2000 when a third bear market started. (Note: I use the dates for the start and end of bear markets supplied by Standard & Poor's Corporation as published on the following website).

How I Proceeded

I selected a variety of ETFs from a list of the most popular ETFs as measured by assets under management available here. These ETFs, 22 in all, represented 22 different categories. I then used the starting and ending dates of bear markets and checked the performance of each of the 22 ETFs during the 2 or 3 bear markets these funds were in existence and averaged these bear market results.

The results of these procedures are shown below. Since the S&P 500 is currently in a bear market, I also ascertained the Year-To-Date performance of each ETF to see how well it seemed to support the prior bear market data.

Finally, I ordered the 22 fund categories in terms of the best performing to the worse performing as reflected by the specific ETF from that category I had selected.

Results

Notes:

1. Results are not annualized.

2. Year-to-Date performance is of June 24.

3. Performance based on 3 prior bear markets are shown with an asterisk (*).

Discussion

It is clear that most categories of stock ETFs have averaged very poor returns during bear markets. After all, bear markets are defined by quite poor stock market returns. But certain categories of stocks have done much more poorly than others.

The worst performers during the two, or in some cases, three bear markets that were available and included for inclusion in my data were Large Growth and Financial, but several other categories were not far behind.

If we consider the current bear market (which was not included in the average bear market performance show in the third column of the above table), we also see Large Growth as one of the poorer stock performers as joined by Consumer Cyclical.

The best stock ETF category proved to be Gold, both in prior and the current bear market. Consumer Defensive did relatively better than most other stock categories as well.

For the most part, all bond funds included did better over the prior bear markets than all of the stock funds that were included. However, there was a complete reversal for Long Term Government bonds, which were excellent performers during prior bear markets but have done very poorly during the current one. Perhaps this is due to the extremely low level of interest rates prior to the start of this year which turned into a bond market rout when the Fed abruptly and rapidly changed course. Corporate Bonds were overall the worst performing bond funds.

Implications

These results give a picture of how different funds and the categories performed on average during prior bear market as well as the current one. Investors who wish to fine tune their specific investments as well as their asset allocations may find it useful to utilize this data showing how ETFs have done across bear markets from at least three different periods, at least two from the past, and one still ongoing.

Tom Madell