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JPS Global Investments Market Update: What (not) to do when confronted with a bear market

Markets sure have been volatile and in the red this year and are now officially in bear market territory (a decline of 20% from the high). There is no cure for bear markets, as they are the admission price of investing. Without them, investments would not offer a risk premium – the return you can earn over leaving your money in cash – as there would be little risk, and investors would be the poorer for it.

There have been 14 bear markets since World War II. In my career, I have seen 3 prior to this one: the dot-com bubble of 2000, the Great Financial Crisis of 2007-2009, and the Pandemic-induced bear market of 2020. What the ones I have personally experienced have in common – and all the other ones for that matter – is that eventually they end, and markets set new highs.

On average a bear market has lasted 142 trading days. If this one is “average” it should be over by January 2023. Of course, nothing ever is average; it is either better or worse.

The good news: a bear market does not have to impede your investment goals and diminish your future wealth. In fact, you might even be able to improve your long-term financial results, courtesy of the bear market.

Even if the Bear can be your friend, it is hard not to have human emotions and thus not experience some anxiety, discomfort, or uncertainty. The burning question I am always asked and ask myself: what should I do? The obvious answer is: don’t panic. But that’s hardly actionable advice: there are specific dos and don’ts when faced with a Bear.

Here are some Dos that we pursue for our clients: tax loss harvesting, rebalancing, pursuing opportunities brought on by lower prices and/or dislocation in the markets.

Here are some Don’ts: doing something for the sake of doing something, swapping your “risky” portfolio for a “safe” one, halting retirement contributions, buying the portfolio that you wish you had today (low on tech, high on commodities, and stuffed with bonds designed for a rising rate environment).

Specifics matter, of course. Should you wish to discuss your portfolio, investment goals, and dos and don’ts, I welcome you to reach out to me.

Kindly, 

Jan Schalkwijk, CFA

(650) 597-9798