It’s official, the U.S. stock market has been in a bear market since it’s all-time closing high on February 19, 2020. Yesterday, the U.S. market had it’s worst day since Black Monday 1987 (market lost over 22% in a single day).
- This is the fastest retreat to a bear market from an all-time high in history taking just 16 trading days.
- This ends the bull market that began with the cycle low on March 9, 2009 for an eleven year run and 400% price appreciation. That run makes it both the longest and strongest bull market on record!
- The S&P 500 is down about 27% from its 2/19/2020 all-time high as of yesterday’s close, which is a level first seen on August 7, 2017 essentially wiping out 2.5 years of appreciation.
- The market would have to climb over 36% from yesterday’s close to get back to the all-time highs.
- For contrast, the foreign stock market (MSCI All Cap World Index) has been in a bear market since January 26, 2018 and is only up about 60% from the March 9th, 2009 lows.
Yesterday, sentiment hit EXTREMELY low levels with CNN’s Fear Greed Index at a record low of just 1.
Continue reading “NOW It’s An Official Bear Market. Some Thoughts…”
I’ve provided you with performance of various asset classes around the world for both the third quarter and year-to-date to give you a sense of how global markets are performing. I’ve sorted the list by Year-To-Date returns going from lowest to highest.
What do you notice? Continue reading “Quarterly Market Update: Diversification Bites”
As discussed at length, I have significant concerns about U.S. stock market valuations and what that may portend for the next bear market. After all, the most reliable valuation metrics are indicating the U.S. stock market is more expensive than ever before (including 1929 and 2000).
Although valuations aren’t useful for short-term trading, valuations do provide insight into the potential severity of the next downturn. So whether the next bear market has already kicked off with the January 26th peak or starts 12 months from now, the key to understand is it will likely be commensurate with the extremity of current valuations (i.e. severe).
A couple proactive approaches I’ve offered for consideration to preserve financial independence is either (1) under-weight U.S. stocks in favor of other asset classes, including bonds, and/or (2) incorporate “put options” to insulate portfolios from a significant stock market decline. Today, I’ll focus on what I’m doing within the bond sleeve of portfolios I manage. Continue reading “How I’m Managing Bond Investments At This Stage in the Cycle”
Have you ever heard of the volatility tax? In case you haven’t, it’s the drag exerted on investment returns from volatility.
In other words, even if two different investments provide the same average annual returns, the investment with more volatility will deliver lower total returns. Let me illustrate. Continue reading “Beware the Volatility Tax”
My expectation for losses in U.S. stocks during the next bear market is over 60%, which would take us back about twenty years and would require at least a 150% gain just to get back to even.
What impact would such a loss have on your portfolio? What impact would that have on your ability to retire or sustain your retirement lifestyle? Would any other financial goals be impacted? How about the toll on your mental health to see such a large chunk of your life savings wiped out. Continue reading “Are You Prepared for the Next Bear Market?”