I’ve read several articles lately that are predicting an upcoming recession based on one or more of the following: current trade spats; a flattening yield curve; over-valued stocks; global political turmoil; increasing corporate debt and tightening of monetary policy by the Fed. They could be right, but most often they’re wrong. In any event, don’t fear the bear…While it’s true that bull markets don’t last forever, it’s also true that bear markets end too. Check out this chart from First Trust:
The chart looks at all of the bull and bear markets since 1926 using the historical performance of the S&P 500 index. You might be surprised that the average bull market lasted 9.1 years with an average cumulative total return of 476%, while the average bear market lasted just 1.4 years with an average cumulative loss of -41%. While any loss in your portfolio can be painful, especially those of 20% or more, long-term investors are often rewarded for their patience. If you are under age 50, these drops in the market are speed bumps along the way to your realizing your financial goals. If you’re over 50 and/or in retirement, bear market losses need to be avoided or minimized. Prudent portfolio allocation that decreases equity exposure and boosts your investments in fixed income securities, insurance, annuities and options can allow investors upside market returns and limit downside risk. If you should have any questions about your portfolio allocation or would like to explore a different investment strategy, please give us a call.