Many times opportunity comes wrapped inside a scary situation, dealing with hardship, or simply accepting change. But nearly every time it ends up requiring a person to step outside themselves and take the proverbial leap of faith.
What’s a Bear Market?
It’s an opportunity…
and it’s scary, it's a hardship, and it requires taking a leap of faith.
What is the conventional definition of a Bear Market?
The Securities and Exchange Commission (SEC) defines a Bear Market as a period of at least two months when a broad market falls by 20% or more. The Standard & Poor’s 500 index, which includes virtually all of the largest and most well-known U.S. companies is in an “official” bear market (if you didn’t know this already), since its peak on Jan. 3, 2022. Since 1928 there have been 26 Bear Markets with an average length of 289 days.
No doubt about it, psychologically a Bear Market can be challenging. The impact can be particularly hard for investors who do not have a well-designed plan as they see their retirement accounts and investment portfolios shrink. And this can create a self-fulfilling cycle, as investors perceive an impending bear market tend to prompt investors to sell even more, thus pushing prices down further and prolonging the pain. What psychologists call a “Negative Loop Cycle.”
What's the good news and what opportunity might a Bear Market provide?
For those investors who have psychology and time on their side, a Bear Market can offer:
So during a Bear Market, there are quite a few things an investor might do, and probably the most important idea you might consider changing is the nomenclature from Bear Market to “Opportunity Market.”
-Paul R. Rossi, CFA