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Navigating the Bear Market

How to Navigate The Bear Market

When stocks are declining, it can cause a lot of stress and uncertainty for investors. Now in 2022, we are in the midst of a bear market- here is how you can best prepare yourself to make it through, stay positive, and benefit from the bull market that will eventually follow! 

Does a Bear Market Lead to a Recession?

Bear markets happen and are to be expected given the current tumultuous nature of the pandemic and the sociopolitical climate. Bear markets don’t necessarily indicate economic recession.  In this current climate, many experts, like Mitch Zacks, believe we are not headed for recession:

The U.S. jobs market is still historically tight, household finances and the U.S. consumer are still healthy, and corporate profit margins are high. I believe sentiment has fueled declines more than fundamentals have.”

Though not all experts agree on what will happen next, the usual indicators of a recession are not currently present in 2022.

Bear Markets in History

The term “bear market” refers to a period of at least two months in which stocks fall at least 20% off their high. Though this percentage is significant, bear markets could perhaps be more generally defined by the sentiments of investors, as they lose confidence and become more risk-averse during these times. Throughout history, stocks lose an average of 36% during a bear market. 

It’s important to note, bear markets tend to last less than a year; whereas, The average bull market duration is 2.7 years. The stock market is positive the majority of the time, so it is best to think rationally about navigating a bear market before catastrophic thinking takes over.

Patience Pays Off 

Though it can be troublesome to think about the losses that occur during a bear market, it is important to shift your mindset towards the future. Many investors take drastic steps when they realize the market is trending downward, often selling off stocks for fear of more substantial losses. Alternatively, some may feel pressure to “buy the dip” in hopes that the prices will soon rise to a profitable level. Both of these types of reactions can in some cases be successful, but are often not. It is impossible to time the market exactly, and attempting to do so can cause more financial and emotional stress than it’s worth. 

“Selling out of stocks and waiting for confirmation that a new bull market has arrived almost certainly means missing the first several months of the new bull, which is a crucial time to be invested.”

This advice may not be applicable for certain people, such as those on the brink of retirement who may not have the time to wait out a volatile market. In any case, it is important to ensure your assets are in the right place for you in particular to meet your long or short term investment goals.

Protect Yourself Against Future Bear Markets

During a bull market, it can be easy to forget how uncomfortable it is to watch your assets go down in value. Be sure to use your resources in times of economic security to ensure your financial safety against future losses. Though the media can be a helpful tool in assessing the state of the market, it will not be the best source of financial advice. Only your financial advisor will know the specifics about your means and goals to help you navigate your way through a volatile market

Investing will always come with risks, and a declining market is one of them! Contact Blakely Financial for further assistance in maintaining diversified investments through a bear market. 

Engage with the entire Blakely Financial team at WWW.BLAKELYFINANCIAL.COM to see what other financial tips we can provide towards your financial well-being.

Blakely Financial, Inc. is an independent financial planning and investment management firm that provides clarity, insight, and guidance to help our clients attain their financial goals.

Securities and advisory services offered through Commonwealth Financial Network, Member FINRA/SIPC, a Registered Investment Adviser.