You’ve heard the terms “bear market” and “bull market”, which become especially oft-used phrases when markets are volatile. While there is no exact definition of either, the consensus generally holds that…
- Bear markets occur when markets drop 20% or more
- Bull markets are all other periods between bear markets
With this in mind, the most recent U.S. bear market began on March 12, 2022, when the S&P 500 closed more than 20% down from its all-time high, set two months earlier on January 3, 2022. This ended the bull market that began on March 24, 2020, in the midst of the COVID-19 pandemic (let that sink in for a moment...a bull started when we were not long into lockdowns and mask/vaccine mandates).
While this most recent bull ran for only 2 years, a quick study of U.S. equity markets over the past 70 years, as the chart below illustrates, shows that we've experienced 10 bear markets. Thus on average, we should expect one every 7 years. And don't forget that over that same 70-year period, we've also experienced 10 bull markets, all of which lasted substantially longer than each preceding bear, and which offered cumulative returns that significantly outpaced previous bear market losses.
Now here's the key to participating in bull markets...you need to be in them! That seems elementary, but if one was so inclined to exit a bear market and sit on the sidelines, with the goal of re-entering when the corresponding bull starts, that is an extremely difficult call to make. Bull markets are usually only officially announced months after they actually started, and when they do commence, pessimism surrounding the bear market is still extremely high (see previous point about lockdowns and mask/vaccine mandates, as an example).
We at Henry Wealth Management have been preaching the same mantra since our inception: "Build a portfolio that you can live with, and then live with it." What we build together takes into consideration:
- Your age
- Your timeframe until you will need income
- Your propensity to accept risk, i.e., market volatility
The vast majority of our clients buy into our mantra and mindset, but we still on occasion, such as right now, like to preach to the choir and offer solid evidence for our beliefs.
We're here to answer any questions. Thank you for your business and trust.