Do Bear Markets Produce Winners?

An analysis of whether leading companies are founded during stock downturns

Selina Troesch
Feb 25 · 6 min read
Image: Shutterstock

In August of 2020, I published research inspired by a 2009 Kauffman Foundation study that is frequently referenced by investors to support the idea that Fortune 500 companies are founded in economic downturns.

In this research, I distinguished between recessions and bear markets to isolate the effect of each type of downturn. That article examined the relationship between recessions and Fortune 500 founding date, finding that Fortune 500 companies were not more likely to be founded during a recession. In this update, I look at the relationship between bear markets and when the companies on the 2019 Fortune 500 list were founded.

The Kauffman Foundation analysis used the 2009 Fortune 500 list and defined economic downturns in two ways:

  • Recessions identified by the National Bureau of Economic Research from 1854 to 2009, defined as period where GDP decreases for two or more consecutive quarters
  • Bear markets from 1945 to 2009, defined as a period where the S&P 500 and Dow Jones Industrial Average dropped by 20% or more over a two month period

My studies update the company list and isolate the effects of recessions from bear markets. As we’ve observed in the economy over the last year, stock market performance and economic activity measured by GDP can diverge. While bear markets often coincide with recessions and can be linked with macroeconomic conditions that effect company formation and growth, each of my analyses focuses on only one definition of an economic downturn.

For this analysis, I used the 2019 Fortune 500 list. The list includes the 500 U.S. based companies with the highest revenue for the previous fiscal year. In contrast to the Kauffman study, I examined only whether these companies were founded during a bear market.

I identified the founding date for each company in Pitchbook. In cases where the company resulted from a merger (for instance, Walgreens Boots Alliance, which came out of the merger of Walgreens and Alliance Boots in 2014), the company’s website determined when the business started (in the case of Walgreens, 1901).

Source: Fortune, company websites, Pitchbook

I compared these founding dates to the dates the stock market was classified as a bull or bear market according to Jack Schannep’s data set on TheDowTheory. Similar to the Kauffman Foundation’s definition, for the market to be considered a bear market, both the Dow Jones Industrial Average and the S&P 500 had to drop by 16% or more over a two month period. Schannep’s data begins in September 1900, so our analysis excludes the 102 companies founded before 1900, leaving 398 companies in the final data set.

Since 1900, the U.S. experienced bear markets 30% of the time. Of the companies analyzed on the 2019 Fortune 500 list, 28% were founded during a bear market. Similar to my conclusions about companies founded during recessions, this analysis indicates that large companies are statistically no more likely to be founded during a bear market than during a bull market.

Source: TheDowTheory, Pitchbook, company websites

In my first study, I noted that the frequency and length of recessions after World War II was notably divergent than pre-war. To account for any possible differences between companies founded in these two eras, I analyzed companies founded before and after the war in separate cohorts.

Number of years in bear vs. bull markets by decade, 1900-2020

In the case of bear and bull markets, the 1990s marked the beginning of a different pattern of bull and bear markets. From 1900–1990, bear markets occurred 38% of the time. From 1990–2020, bear markets have occurred much less frequently, approximately 14% of the time.

Distribution of 2019 Fortune 500 companies between the pre-1990 and post-1990 periods

Approximately 24% of the companies included in this analysis were founded after 1990. This same period from 1990–2020 represents 28% of the time from 1900–2020.


Before 1990, the stock market experienced bear markets 38% of the time, compared to 34% of Fortune 500 companies that were founded during those bear markets.


After 1990, the stock market experienced bear markets 14% of the time, compared to 10% of Fortune 500 companies that were founded during those bear markets.

This analysis assumes that the number of companies founded during bear markets should be proportional to the time the stock market spends in bear markets. If, for example, twice as many companies are founded during a single year of a bull market compared to a single year of a bear market, I would revisit this methodology to account for the variable rate of new company creation.

This analysis indicates that the correlation identified by the Kauffman team may have been specific to the list of companies on the Fortune 500 in 2009, rather than a reliable signal that predicts company success. 193 of the companies that were on the list in 2009 are not on the 2019 list, and this is nearly 40% of the data set. In future studies, I will compare the 2009 Fortune 500 list the Kauffman team used to the 2019 list we used to see whether detectable patterns emerge in the companies that stayed on the list.

This analysis does not suggest that companies founded during bear markets necessarily have a better or worse chance of becoming members of a list like the Fortune 500. The study suggests that industry leading businesses can be born independent of what is happening in the stock market. As venture capitalists, this data provides some evidence to fund companies at a consistent pace regardless of stock market conditions, because there does not appear to be a pattern of outsized success tied to up or down markets.

Selina Troesch Munster is a Principal at Touchdown Ventures, a Registered Investment Adviser that provides “Venture Capital as a Service” to help corporations launch and manage their investment programs.

This article includes information from third party sources believed to be reliable; however, we make no representations as to its accuracy or completeness. References to strategies are for illustrative purposes only and should not be relied upon as a recommendation to engage in any particular strategy or to invest in any particular security. Opinions expressed herein are based on current market conditions and may change without notice and we reserve the right to change any part of these materials without notice and assume no obligation to provide an update. Recipients are advised not to infer or assume that any securities, strategies, companies, sectors or markets described will be profitable or that losses will not occur. Any description or information regarding investment process or strategies is provided for illustrative purposes only, may not be fully indicative of any present or future investments and may be changed at the discretion of the manager. Past performance is no guarantee of future results.

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