Putnam Investments put out a chart showing the bull and bear markets since 1949 (hat tip to Barry Ritholtz over at the Big Picture blog). The chart below highlights a few important things all long term investors should realize.

On average, bull markets have returned 145% and lasted nearly 4 years. The longest bull market was during the 1990s, when the S&P 500 returned 526%. Unlike bull markets, bear markets, on average, are much shorter. The average bear market has seen losses of 23% and has lasted 14 months. Two out of the three worst bear markets have happened since 2000 (stocks fell 43% from 2000-early 2003 and the market declined 51% from 2008-2009).

The shorter duration bear markets are one reason why timing the market (getting out of the market before or at the start of a bear market and then successfully re-entering the market) can be difficult – these market downturns can start and end quickly and always come after strong up moves in stocks. It also shows that bear markets are a necessary part of long term investing. The most recent two bear markets have been two of the worst we’ve seen in the last 65 years of market history covered by the chart.

The yellow line on the chart shows the Fed Funds rate historically. The current Fed’s ultra-low interest rate policy stands out significantly when viewed in the context of the chart.