A “Bear Market” is usually defined as the condition in which the price of a market falls – on a closing basis – 20% (or more) from recent highs amid widespread negative investor sentiment.
That’s the definition. Can you tell me: Are we in a Bear Market?
Your answer to the question, “Are we in a Bear Market?” will depend on what “market” you are considering.
For many investors, the current market IS a bear market. To the extent that you bought the narrative that value was dead (as headlines have promoted with mounting enthusiasm since 2019) and focused your equity holdings in growth, you are in a Bear Market. Nearly half of the Nasdaq is at least 50% off of their 52-week high. If you were hyper-concentrated in FAANG stocks or the pandemic darlings such as Zoom, Moderna, or Peloton, you may be experiencing a Mega Bear.
The more concentrated your portfolio was coming into 2022, the more bearish you are probably feeling today. Some equity portfolios are down over 70% (see Cathie Wood’s ARK Innovation ETF).
Many growth-oriented investors are treating this as a “buy the dip” moment – a principle heavily encouraged by fund managers like Cathie Wood who are at least partially motivated by the massive decline in revenue they experience as both markets decline AND investors leave their funds in droves.
There is always additional risk inherent in chasing a single idea.
Personally, I look to a broad market like the S&P 500 or the Russell 3000 to answer the question, “Are we in a Bear Market?”
Considering these two, we are not in a Bear Market. I’m not predicting whether markets turn here and begin a recovery or continue downwards to reach Bear Market territory. I’m suggesting:
- You can be successful without having to predict, and
- Concentration is a form of prediction.
Currently, these broader indices are down a little more than their average annual decline since 1980.
When the markets turn as volatile and confusing as they have over this last short block of time, even the most patient investors may begin to question their investment plan. Having helped many families plan for and weather these storms, I can empathize with investors who are troubled and anxious.
I’d like to help, if I can.
By appointment, we would love to sit with you (over a cup of coffee or on a Zoom meeting). We will ask you to briefly outline your goals – what you are hoping your portfolio will do for you. Then we’ll review the portfolio with you.
There can be two outcomes to this conversation:
- You may have a beautiful portfolio that is just working through normal volatility and you would be best served to stay the course… and we will be happy to tell you so. Or,
- Your investments may not be well-suited for your goals. If this is the case, we will explain why, in plain English, and if you’d like… make some recommendations.
There will be no cost or obligation for this conversation.
We are not a fit for everyone. We will be happy to explore a client relationship if there is an interest on your part. Those who are a good fit for what we do know it almost immediately.
If you are curious, submit your request HERE. In the questions box, please write “Mindful Money Second Opinion.” We will reach out directly to schedule a brief conversation.
Stop Predicting. Start Planning. Stay Mindful.