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Bear Markets
Create Opportunity
The National Bureau of Economics announced Monday that the US economy was in an "official" recession and has been since December of 2007. The stock market began its decline in October of 2007. That puts the current Bear Market at the 14 month mark.
The current bear market has been a painful one, losing close to 43% from October 2007 to this last October. That would make this bear market the 5th worse bear market since 1929. However, with bear markets comes great opportunities. Interest rates are low, commercial goods are on sale and stocks are cheap.
Since 1929 there have been 13 bear markets with an average length of 22 months. A bear market has historically happened one out of every six to seven years. If this bear is looking to loom for the average 22 months then we are more than half way done. Secondly, the best ten trading days have always occurred during a bear market and most of the one year returns after a low have usually returned more than the loss, with an average of a 46% return.
Therefore, with the 2008 year coming to an end, it is important to look ahead and see what opportunities lie ahead. Take a look at the following chart:
Historical Bear Markets | Peak | Low | Duration in months | % Loss | % gain 1 year after low |
| 09/03/1929 | 07/08/1932 | 34 | -86% | 124% |
| 03/10/1937 | 04/28/1942 | 61 | -60% | 59% |
| 03/24/2000 | 10/9/2002 | 31 | -49% | 34% |
| 01/11/1973 | 10/3/1974 | 21 | -48% | 38% |
| 10/9/2007 | 10/10/2008 | 12 | -43% | ? |
| 11/29/1968 | 5/26/1970 | 18 | -36% | 44% |
| 08/25/1987 | 12/4/1987 | 4 | -34% | 23% |
| 05/29/1946 | 06/13/1949 | 37 | -30% | 42% |
| 12/11/1961 | 06/26/1962 | 6 | -28% | 33% |
| 11/28/1980 | 08/12/1982 | 21 | -27% | 58% |
| 02/09/1966 | 10/07/1966 | 8 | -22% | 31% |
| 08/02/1956 | 10/22/1957 | 14 | -22% | 31% |
* Source: Fidelity Investments
Although past performance is no guarantee of future performance, we can see that bear markets breed bull markets and create great opportunity. These times are very scary and confusing for most investors. Emotions tend to rule decisions to move to safety. I certainly empathize with people who find the current environment troublesome and frustrating.
Here's what I'd like to offer: A cup of coffee and a second opinion. By appointment, you or anyone you know who may be concerned or questioning their current financial situation are welcome to come in and sit with me for awhile. We'll discuss your concerns, review your portfolio and current situation and give you a second opinion.
If I think your investments are well-diversified and suited to meet your goals, in spite of the current market turmoil, I will gladly tell you so. If, on the other hand, I feel some changes need to be made, I'll explain why, in plain English, and of course, offer some alternatives. Either way, the coffee is on me.
Please feel free to contact my office or send an e-mail to schedule an appointment or conference call. Also, feel free to pass this opportunity on to a friend.
Have a Happy and yes, "Prosperous" New Year!
Sincerely,
Janen Moyer-Pesso, CDFA, LPS
Life / Wealth / Security
Securities offered through Royal Alliance Associates, Inc. Member FINRA, SIPC.
Advisory services offered through Baron, Silver, Stevens Financial Advisors, LLC, a Registered Investment Advisor.
