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.

Typically, but not always, such poor sentiment leads to a sharp rally. That appears to be the case today because the market is poised to open up at least 5% from yesterday’s close.

So…now what?

Be prepared for an emotional roller coaster. As I’ve said here before, be ready for sharp declines along with swift, powerful rallies.

When the stock market is falling it’s going to feel like the world is ending and panic can set in. Conversely, when the market rallies hard there may be some “Fear Of Missing Out” (FOMO) causing investors to try and chase back in. Both emotional reactions can be devastating to a portfolio and, more to the point, jeopardize your financial independence (e.g. retirement goals).

My advice is to remain disciplined and committed to your investment strategy! Don’t try to pick bottoms! The phrase often used in investing is, “Don’t catch a falling knife.”

Instead, rebalance your portfolio when certain target thresholds are violated. For example, if you have a 30% target to U.S. stocks in your portfolio and a couple weeks of declines causes that portion of your portfolio to fall to just 20%, as an example, then it may be a good opportunity to sell other assets that exceed their targets (likely bonds in this scenario) using those proceeds to increase your stock exposure back to the 30% target.

Conversely, when powerful rallies cause U.S. stocks to climb to 36% of your portfolio, as an example, then that’s a good opportunity to sell those assets and rebalance to others that are below your targets.

This approach to rebalancing is a methodical, objective, quantifiable, and disciplined process for buying low and selling high throughout the cycle.

Of course, this all assumes that your investment strategy is appropriate to begin with!

If you have the wrong strategy in place from the get-go then you are in trouble.

An appropriate investment strategy for you and your unique circumstances can only be identified upon the completion of thorough financial projections that include multiple scenarios and market stress tests. The reasons for the stress tests should now be crystal clear after everything that has transpired over the last month!

For your projections to be worth anything, you must have an advisor who understands the problems and risks facing the market to ensure more realistic assumptions in the projections. If the assumptions are bad, or overly-optimistic, the recommendations resulting from those projections will be garbage and, worst case, dangerous.


IF this turns out to be the sustained bear market I’ve been warning about, it could last 1-2 years or more and will be full of powerful rallies and sharp declines.

The good news is that at some point the market will be cheap again and there will be really good assets offered at fire-sale prices. However, in order to take advantage of those situations, you need some dry powder so we must manage our emotions until then. You also need an advisor who can help you identify when that is.

Lastly, make sure you have sufficient cash reserves! I recommend a minimum of 6-12 months’ worth of expenses but every household is unique and will have different requirements.

*Projections are merely estimates based on assumptions that we don’t know are accurate. Therefore, projections themselves are not accurate, however, they are helpful in identifying ways of improving our probability of success across a variety of hypothetical scenarios.

Past performance is no guarantee of future results. 

Data from third-parties is believed to be reliable but accuracy cannot be guaranteed. This is not investment advice but intended as education!

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