We are in the midst of a particularly challenging time in the investment world, with volatility since the start of the year inspiring endless headlines about an uncertain future. If you have seen many of these eye-catching captions, you will have noticed one phrase has become particularly common the last couple of weeks: bear market. A bear market refers to a 20% decline from a high which we are currently seeing in many market indices around the world, such as the S&P 500 (500 of the largest companies listed on the US stock exchange) which is currently down 21.5% year-to-date (as at 22nd June).
This raises the question: how long will we be in bear market territory? The S&P peaked around 3rd January 2022 and since then the market has been volatile whilst sloping downward. Last Three Bear Markets
As shown in the table above, if you look at the last three bear markets: the Dotcom crisis from March 2000, the Global Financial Crisis from October 2007, and the February 2020 market downturn which was triggered by the start of the Covid pandemic, the longest one we have seen was around 2 and 1/2 years long. The current bear market is being caused by many factors such as, high inflation, rising interest rates, the war in Ukraine, the pandemic, lockdowns in China, supply chain issues, etc. Unfortunately, no one can predetermine the bottom of the market and we will only know the market has completed its dip once it has passed. The current 21.5% reduction has occurred over about 5.3 months, so far. Bear markets are characterised by low investor’ confidence and pessimism. During a bear market, investors often seem to ignore any good news and continue selling quickly, pushing prices even lower. While the journey to the bear has been accompanied by stomach-churning volatility, investors can take some consolation from the fact that the S&P 500 typically rebounds quickly after major drops. Three-year forward returns from the date when a bear market became official averaged 30% since 1957, with the U.S. S&P 500 sporting a positive return in all but one such occasion.
Whilst all the news about bear markets may seem doom and gloom, a bear market presents plenty of opportunity for investors which will be beneficial for long-term investment strategies. Trilogy’s Investment Specialist, Chiti, recently sat down with Booster’s Head of Growth, Dave Copson, to discuss the current market and how investors can take advantage of it. This interview can be found here and on our website, along with all our recent market updates:
Some tips on how to invest during a bear market
Diversify your investments
Stick to your goals
Focus on long term
Dollar cost average
Seek qualified financial advice
If you have any questions, please don’t hesitate to contact us on:
09 553 8928
The Trilogy Financial Solutions Team