There is no doubt that 2022 has been a year of challenges: inflation, supply chain shortages, and war in Ukraine. Included in this mix is the potential for recession in the US. As a result of these, and other factors, we are currently experiencing a bear market in the NASDAQ, with the S&P 500 inching ever closer to the same mark. Currently, the Dow Jones is down 16% buoyed mostly by oil and gas companies in the index. A bear market is defined as a 20% decline from the market high, conversely a bull market is a 20% increase from the market low.
Watching your hard-earned savings decline is not easy and it’s understandable to feel anxiety during sharp market declines. However, one very important thing to remember is that bear markets tend to be short-lived. The average length of a bear market is 11.3 month or 339 days. That’s significantly shorter than the average length of a bull market, which is 1,584 days or 52.8 months. For a brief history of Bull & Bear Markets, please click the link “ Bull & Bear Markets: A Timeline”.
The best way to weather a downturn could be to stay invested since properly timing the beginning of a new bull market can be challenging. Staying the course, or at least staying in the market, leads to positive returns over the length of the bear market as it leads into the next bull market. Consider that 34% of the market’s best days took place in the first two months of a bull market—before it was clear a bull market had even started. Pulling money out of the market and trying to “time the market” generally leads to missing these all important two months.