The US bear market of 2007–2009 was a 17-month bear market that lasted from October 9, 2007 to March 9, 2009, during the financial crisis of 2007–2009. The S&P 500 lost approximately 50% of its value, but the duration of this bear market was just below average.
The bear market was confirmed in June 2008 when the Dow Jones Industrial Average (DJIA) had fallen 20% from its October 11, 2007 high. This followed the bull market of 2002–07 and was followed by the bull market of 2009–2020.
The DJIA, a price-weighted average (adjusted for splits and dividends) of 30 large companies on the New York Stock Exchange, peaked on October 9, 2007 with a closing price of 14,164.53. On October 11, 2007, the DJIA hit an intra-day peak of 14,198.10 before starting to screech.
The decline of 20% by mid-2008 was in tandem with other stock markets across the globe. On September 29, 2008, the DJIA had a record-breaking drop of 777.68 with a close at 10,365.45. The DJIA hit a market low of 6,469.95 on March 6, 2009, having lost over 54% of its value since the October 9, 2007 high The bear market reversed course on March 9, 2009, as the DJIA rebounded more than 20% from its low to 7924.56 after a mere three weeks of gains. After March 9, the S&P 500 was up 30% by mid May and over 60% by the end of the year.
Index levels
§Values represent percent change from previous date listed in table.
Opinions regarding the cause
During the bear market a heavy debate ensued as to whose fault the falling market was. The political parties were heavily divided during this period. For the most part there were three camps: ones that simply blamed the economy, others that wanted to pin the passing Bush Administration and others that wanted to push the blame on the newly arriving Obama Administration.
Blaming the economy
In February 2007, a coming recession and bear market was predicted by Paul Lamont due to a growing debt bubble, the housing bubble and lack of car sales.
High oil prices have impacted global economic growth, causing the Dow's 12th bear market since 1962 and the first since 2002 according to The Washington Post.
Tom Petruno of the LA Times points out that "the U.S. stock market meltdown this year isn't happening in isolation. Major European stock markets also are down more than 20% since Jan. 1. In Japan, the Nikkei index hit a 26½ -year low this week.”
Dick Meyer of NPR believes that "the idea of blaming one person for the downfall of the economy with a gross domestic product of about $14 trillion, powered by 300 million people and engaged in complex global commerce is nuts — whether that person is Bush, Obama, Alan Greenspan, Bernard Madoff, Osama bin Laden or the editors of opinions at The Wall Street Journal."
Michael J. Panzner, author and 25-year Wall-Street veteran, says that "the real reasons behind the sell-off ... include the bursting of history's biggest housing bubble, which triggered a shockwave of wealth destruction that has wreaked widespread havoc throughout the economy, as well as the unraveling of a multi-trillion-dollar financial house of cards built on greed, ignorance, and fraud."
Blaming the George W. Bush administration
Former United States Secretary of Labor Robert Reich said the fall in stock prices since Obama's inauguration was caused by the policies of former President George W. Bush, and that the housing and financial bubbles, as well as the decline in the stock market, all began under Bush's presidency.
Justin Fox of Time magazine pointed to eight major economic mistakes George W. Bush made: 1) A return to deficit spending, 2) Iraq, 3) Tax cuts for the rich, 4) Sarbanes–Oxley Act, 5) Encouraging consumer spending, 6) The lack of an energy policy, 7) State of denial, and 8) A muddled first bailout by Treasury Secretary Henry Paulson.
In 2005, Congressman Ron Paul (R-Texas) said section 404 of the Sarbanes–Oxley Act (2002) which requires chief executive officers to certify the accuracy of financial statements caused capital flight away from the U.S. stock market. Later in 2008, Paul said that the government bailouts of badly run corporations was rewarding bad behavior and punishing good behavior, and that it prevented resources from being allocated away from inefficient uses to more productive uses, and that this lowered the overall amount of wealth across the entire economy.
In March 2009 White House budget director Peter Orszag said, "Job losses began in January 2008. The stock market started declining October 2007.... This has been, you know, eight years in the making, and again, it's going to take some time to work our way out of it."