In this Arista Market Update, Paul L. Moffat discusses the bear market and provides some important facts to help put things into perspective.
Hello, welcome to Arista’s Market Update. Hope you’re well and staying healthy and strong through this COVID-19 pandemic.
Many years ago Victor Hugo had been advanced some money to write a masterpiece. He delayed, he delayed, and he delayed, and finally they locked him in a room, and said “You can come out when the manuscript is done.” Well, after 90 days he came out of the room and that manuscript was The Hunchback of Notre-Dame.
Painful, hard, lots of discipline, strategy and structure, it produced one of the great novels of all time that Victor Huge wrote.
We’ve officially entered a bear market. From peak to trough, we’ve seen a 20% decline. So let me share with you some facts to help us understand the big picture.
Fact #1 – bear markets are normal. There have been 25 bear markets in the S&P 500 since 1928, and there have also been 26 bull markets. Potentially if we have reached bottom, the bull market has now started.
Number 2 – bear markets tend to be short-lived. The average bear market 299 days or 10 months. The average bull market 2.7 years.
Fact 3 – Half of the S&P 500 index’s strongest days in the last 20 years occurred during a bear market. You have to stay invested and continually participating in the market to reach your potential.
Fact #4 – a bear market doesn’t necessarily indicate an economic recession. There’ve been 25 bull markets since 1929, but only 14 recessions occurred during that time.
Fact #5 – assuming a 50 year investment time horizon, you can expect to live through 14 different bear markets. How many bear markets have you experienced?
Fact #6 – bear markets can be painful, but overall markets are positive a majority of the time. Bear markets account for 20% of those years, and the bull markets then account for the other 80% of those years.
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