A bear market is when securities prices fall 20% or more from recent highs. This period of falling stock prices come from widespread pessimism and negative investor sentiment. This term “bear market” got its name from the way a bear attacks its prey, swiping its paws downward.
In December of 2018, we temporarily fell into a bear market as the S&P 500 dropped 20.18% from the 9/20/18 highs to the Christmas Eve lows. This was a painful three months that had many people fearing over the next stock market crash.
Almost a year later, the S&P 500 is up 24.75%, not including dividends, since the “technical bear market”.
Although the S&P 500 has made steady moves back towards all-time highs, we are now seeing pockets of extreme pessimism. The traditional retailers are getting punished. See the retail carnage below in comparison to the S&P 500.
I say “pockets” because it clearly isn’t all doom and gloom with the overall market posting double-digit returns so far. You can also look at the chart below that shows the US Consumer is alive and well according to Walmart, +32%, and Amazon, +35%. Some would pose an argument, however, that Amazon is not even retail anymore.
We are seeing many conflicting signals. If we examine CNN’s Fear & Greed Index, we show that “Extreme Fear” is driving the market right now. This index is calculated using several factors that can be reviewed here.
We can also see the returns of “safe haven assets”. Historically, Treasuries, +19.6%, and Gold, +17.26%, appreciate when there is market uncertainty and fear of decline. Bitcoin has gone bonkers this year, and some have made the argument that bitcoin will be a safe haven.
That is enough charts for today’s work. Remember to focus on what you can control.
Key Long-Term Investment Thinking:
- Stay diversified with your portfolio and practice dollar-cost averaging.
- Ignore television coverage of financial markets – They are not here for your specific situation
- Do not react emotionally to short term market moves
- Conduct regular cash-flow analyses to confirm your investment portfolio is still tracking within your financial plan
More to come.
*Athanassios Panagiotakopoulos is an Investment Advisor Representative with Dynamic Wealth Advisors dba Life Managed. All investment advisory services are offered through Dynamic Wealth Advisors.