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Bear Market Thoughts

With the market officially in a bear market as of Monday’s close, I thought I should share a few quick thoughts. 

  • Bear markets are normal. We typically have one every 3.5% years. 
  • We almost had one a few weeks back, but the market did not close down 20% from its previous high. After that, the S&P500 gained something like 7%. 
  • The average bear market is down 36% from the previous high. 
  • On average, bull markets gain 114% after bear markets. 
  • Bear markets last on average about 9.5 months. Bull markets last about 2.7 years. 
  • In the last 20 years, half of the S&P500’s best days occurred during a bear market. Another 34% happened in the first two months of the bull market, although we didn’t know we were in a bull market at the time. (I have thoughts about how market timing doesn’t work going through my head as I write this). 
  • Just because we are in a bear market does not mean we will be in a recession. Recessions and bear markets occur at the same time a little over 50% of the time. Bear markets do mean the economy is slowing, but not that a recession is guaranteed. 
  • Over the last 90ish years, the market has been positive nearly 80% of the time. This is even though we have had 27 bear markets. 
  • There was something I saw Monday night and now cannot find it to provide the exact numbers. However, I believe it said even with the S&P500 in a bear market, it is still up nearly 30% the last 3 years and 55% the last 5 years. 
  • I won’t even mention Bitcoin as I don’t play in that space. However, Ethereum is down 55% since Jim Cramer said it had another 35-40% gain potential just a few weeks ago. 
  • Speaking of my favorite financial pornographer, if you had shorted Jim Cramer’s recommended buys, you would be up 30% this year. 
  • My point – Be careful if you are taking financial advice from an entertainer. Or a purveyor of financial pornography as we call them in my world. Maybe you would be better off watching HGTV instead of CNBC. 
  • Odds are the market will continue to bounce around for some time. It is still looking for direction. 
  • There are a lot of things to consider now from the Fed’s perspective. Inflation is high around the world (the US’s inflation is in the middle). Supply chains are still out of whack. Unemployment is still incredibly low. Wage increases have started to slow. 
  • The Fed will definitely continue to raise rates. Last week there was a 3% chance the Fed would raise rates by .75% this week. As of Monday night those odds went up to over 60%. 

Personally, I finally feel good about my monthly contributions to my investment accounts. For the past few years I have felt like I am paying a premium every time money goes into my 401k. I like buying things at a discount and the market is definitely on sale right now. Honestly, I wish I had more to invest. But the kids are home for the summer and are eating me out of house and home😉

I’m Dan Johnson, CFP®, founder of Forward Thinking Wealth Management. I run a flat-fee financial planning and investment management firm located in beautiful Akron, OH. Although I am in Akron, OH, I work with clients regardless of location. I cater to owners of equity compensation positions who are looking to organize their financial lives, keep more of what they make, and do the things they want in retirement and even now.