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How Much Longer Will We Be in a Bear Market?

How much longer will we be in a bear market? We don't try to time the market, and we don't recommend you do either, but we can use historical time periods to put things in perspective.

Full Transcript:

Hello, welcome to Arista Advice! Question of the week is: "Paul, how much longer will we be in a bear market?" Well, we don't try to time the market, and we don't recommend you try to time the market. But instead we use research and historical time  periods to learn from them to use them as a gauge. 

Shelby Davis, who runs the Davis Funds, who I've had the opportunity to meet with twice, it's a very large investment firm in New York. It's a gentleman who rides his bike to work, really intellectual smart person. He says this "History provides crucial insight regarding market crisis: They are inevitable, painful and ultimately surmountable."

Let me share with you this graph that will help us put things in perspective. The study shows that since 1945 bear markets have only accounted for 29% of the time periods. Even more interesting and most of the time, 19% of the time, the market has been in recovery period. In fact, 35% of those 70-plus years has been spent at all-time highs. So, this is a chart, we call it the donut chart, to help people keep things in perspective.

The media's job is to scare you, to frighten you, to make things bad, evil. "The world's coming to an end. Stay tuned." And then commercials pop up, ignore that stuff that stuff has its new cycle, and it ends. The sun comes out, the dark clouds disappear, the spring flowers start growing, the tulips come to the surface, and life is good again. But these adjustments in the capital markets are essential and necessary.

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