Navigating volatility during a Canadian bear market can define your long‑term success

When markets start to tumble, many investors begin to question their strategy—especially if headlines warn of a looming Canadian bear market. It’s easy to feel pressure to sell when stock values drop sharply, but history shows that the worst decision you can make in a downturn is to exit the market entirely.

Whether you’re an experienced investor or just starting out, navigating a Canadian bear market requires perspective, patience, and a focus on fundamentals. Sharp market corrections are unsettling, but they’re also a normal part of the economic cycle—and they often set the stage for future gains.

At TSI Network, we’ve consistently advised our readers to think long-term, even when short-term conditions look bleak. A Canadian bear market—defined by a decline of 20% or more from recent highs—is not the end of opportunity, but rather a moment to reassess and reaffirm your investment goals.

In the sections below, we look at historical market data, long-term equity trends, and why staying invested—even during a Canadian bear market—can pay off in the years ahead.

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What can we learn from past bear markets?

The traditional bear market threshold is a 20% drop from a market peak. And although, in our view, looking at past market movements is no guide to what happens next, it’s interesting to note that stocks have always bounced back from market downturns.

The market disruption that started in mid‑February of 2025, and continued in March and April, has seen declines for the U.S. market as much as 19% at times.

But consistently staying invested in stocks–and even during bear markets–should pay off for you.

What drives a Canadian bear market?

The natural tendency for equity markets is to rise over time. The average annual growth in U.S. equities over the past 97 years has been 9.9% per year. This was 6.8% per year higher than inflation, and 6.6% higher than the return on cash. However, for this additional return, investors faced higher risks. These risks come in the form of higher volatility, but also sharp declines in stock prices that can last several months or longer.

Still, these risks should not be overemphasized–especially for investors with investment horizons of 5 years or longer. For investments into a broad basket of U.S. equities with holding periods longer than 5 years, the risk of capital loss is less than 10%; for holding periods longer than 10 years, less than 5%; and zero for holding periods over 15 years.

The current market decline is mostly attributable to the uncertainty created by the Trump administration’s tariffs, but there may be other contributing factors in the decline such as a mature equity bull market, stretched valuations, fears of a U.S. recession, and heavily indebted companies and investors

How often does a bear market hit?

The first of our studies looks at declines in the S&P 500 of 20% or more over the past 70 years. There were only 12 such occasions where the S&P 500 index dropped by more than 20% before it resumed its upward trend.

The worst of these happened between 2007 to 2009 when the market declined by 57%. Across all the bear markets, the average decline was 33% and it took an average of 245 trading days (12 months) from peak to bottom.

However, some bear markets reached their bottoms very quickly (1987, 2018, and 2020) while others took much longer–up to 2.5 years (2002).

Not shown in the study was the biggest of all bear markets which happened during and after the time of the great depression.

Between 1929 and 1932, the U.S. stock market declined by 87% and it took 22 years before the market exceeded its previous high.

Is this a good time to buy?

When markets fall sharply–typically 20% or more–it can feel unnerving. But historically, markets have shown resilience. For example, even after a mean drop of around 33%, markets returned to positive territory within 12 months. That means a bear market can offer strategic buying points.

For Canadian investors, passive exposure through low-fee ETFs has proven effective. Products such as XIU and XDV provide low-cost, diversified access to the TSX–ideal for staying invested through volatility.

Low-fee ETFs and diversified strategies remain smart approaches, even in volatile times. Likewise, bear funds can be risky and are often best avoided by long-term investors.

How long does a bear market last?

Bear markets vary in length–from sharp drops and swift recoveries to prolonged multi-year declines. In the U.S., the average slide takes about a year (245 trading days), though extremes exist. Canada often mirrors U.S. trends, especially due to interconnected financial systems. But its timing can be affected by commodities, national policy moves, or Bank of Canada decisions. That being said, patience has historically paid dividends.

For Canadian investors, low-fee ETFs and diversified strategies remain smart approaches, even in volatile times. Likewise, bear funds can be risky and are often best avoided by long-term investors.

What lessons does history teach us?

• Strong rebounds follow steep drops. The average 33% decline is typically followed by full recovery within 12 months.
• Bear markets are inevitable–and healthy. They correct bubbles, prune excess, and set the stage for the next bull cycle.
• Staying calm matters most. If you can hold equities through 3–5 years, downturns often become opportunities.

A Canadian bear market isn’t a signal to panic–it’s a reminder that markets move in cycles.

Investors can ride out volatility and emerge stronger. Stay disciplined–and let downturns work for your future, not against it.

What are your thoughts on staying invested during a Canadian bear market? Have you made any strategic shifts in your portfolio in response to recent market declines? Let us know in the comments below.