How Long do Bear Markets Last?

May 11, 2022
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As of the close of business this morning, the S&P is down 17%, with the market being 65% oversold. The technical definition of a bear market is 20% which we hit temporarily.

The Nasdaq 100 is already in a bear market, and so is the Russel 2000.

It has been a couple of years since we have experienced a bear market, so let's have a refresher.

Bear markets are expected.

They can be painful.

The reasons are always different, but the emotions are the same.

No one knows how long it will last.

They will end eventually.

The longer the recession lasts, the more irritated it becomes. The longer before the policy decision to correct the problem, the more chance we have for a recession.

The bottom will look evident in hindsight, but predicting the bottom in real-time is not easy.

Over 15 bear markets, the average downturn is a loss of 30%. It takes just under a year to reach a bottom, and then it takes a little under one and a half years to break even.

Successfully navigating a bear market requires patience and a good handle on your emotions.

Some good news is we are at the highest level of cash on my technical chart: 70%. This occurred before the market bottomed and could produce V-shaped recoveries. We are also 65% oversold, which I have seen since 2000,2008, and 2020.

Bear markets are not pleasant. However, they are normal and sometimes healthy. The main thing that investors overlook is how much risk they had in their portfolio and how many betas were embedded in their holdings.

We give a strong emphasis on risk management. Of course, it won't do away with losses, but they will not be as severe as the losses of high-risk portfolios.

So, what is your risk number?

Bill