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  • Anthony Guzman, CFP®

Gratitude During Bear Markets

Bear Markets Come and Go

The longest bull market in history lasted almost 11 years before coronavirus fears and the

realities of a seriously disrupted U.S. economy brought it to an end. If you are losing sleep over volatility driven by a cascade of disheartening news, it may help to remember that the stock market is historically cyclical. There have been 10 bear markets (prior to this one) since1950, and the market has recovered eventually every time. Bear markets are typically defined as declines of 20% or more from the most recent high, and bull markets are increases of 20% or more from the bear market low. But there is no official declaration, so in some cases there are different interpretations regarding when these cycles begin and end. On average, bull markets lasted longer (1,955 days) than bear markets (431 days) over this period, and the average bull market advance (172.0%) was greater than the average bear market decline (-34.2%).

The bottom line is that neither the ups nor the downs last forever, even if they feel as though they will. During the worst downturns, there were short-term rallies and buying opportunities. And in some cases, people have profited over time by investing carefully just when things seemed bleakest. If you're reconsidering your current investment strategy, a volatile market is probably the worst time to turn your portfolio inside out. Dramatic price swings can magnify the impact of a wholesale restructuring if the timing of that move is a little off. A well-thought-out asset allocation and diversification strategy is still the fundamental basis of good investment planning. Changes in your portfolio don't necessarily need to happen all at once. We encourage you to try not to let fear derail your long-term goals.

How to Practice Gratitude During Down Markets

1. Remember that bear markets are a normal part of the market cycle and that history shows good times outweigh the bad.

2. If your time horizon allows and you have sufficient cash reserves, consider adding to your investments and rebalancing to your target allocation while market prices are down.

3. Consider Roth conversions during a down market, especially if you fall in a low tax bracket year and expect your future tax rate to increase.

4. Consider looking at your accounts less often and instead focus on other aspects of your life that you are grateful for.

5. Still worried about your portfolio? Give us a call and we can help remind you of your goals and the bigger picture.

The S&P 500 is an unmanaged group of securities that is considered to be representative of the U.S. stock market in general. The performance of an unmanaged index is not indicative of the performance of any specific investment. Individuals cannot invest directly in an index. Past performance is not a guarantee off future results. Actual results will vary. Source: Yahoo! Finance, 2020 (data for the period 6/13/1949 to 3/12/2020)


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