“How long?”
That’s the question on many investors’ mind as we pass the halfway point of 2022. Since its highs last January, the broad equities market in the US, as measured by the S&P 500, fell just over 23% by mid-June, fulfilling the classic definition of a bear market. Since then, the index has clawed back about 6% of the loss, closing (at this writing) a bit below the 4,000 mark.
It has not been enjoyable for investors to watch the deterioration in portfolio values as the stock market sustained shocks from ramped-up inflation, oil and other commodity uncertainties around the war in Ukraine, rising interest rates, and recession worries—on some days, all happening at once. Markets remain especially sensitive to news of rising inflation, and all eyes are on the Fed to see if its “bitter pill” of interest rate hikes and tightening money supply can subdue inflation without stifling the economy and bringing on a recession.
In the first part of July, the markets were somewhat buoyed by positive earnings reports from major US corporations. For many analysts, this indicates that recessionary conditions are receding, at least for the time being. Others point to the still-strong employment numbers, noting that the current unemployment rate of 3.6% remains at or near the lowest reading since pre-pandemic times: another data point not usually associated with recessions. Recently, markets have rallied strongly, leading some to hope that the bear market is coming to an end.
Are those hopes premature? It’s still impossible to tell. In fact, one trait that bear markets and recessions share is that they can only be fully discerned in hindsight.
For most investors, however, this is not the time to yield to despair or panic. Remember, there have been 14 bear markets since 1947, each one different than the others in cause and duration. Historically, bear markets last an average of 9.5 months. The longest bear market on record lasted 1.7 years (1973–74), and the shortest was 1 month (March 2020). Perhaps the most important point to remember is that historically, the markets have been remarkably resilient over the long term, with each bear market being followed by a bull market that took indexes to new all-time highs.
When will the next turnaround happen? We don’t know, and trying to pick either “the bottom” or “the top” of any market cycle with better than random accuracy is impossible, as many studies have shown. Rather, investors who stick to their long-term strategy, maintain good diversification, rebalance regularly, and remain disciplined and patient, will generally do well over the long haul.
At Griffin Black, we know you have questions, and our primary focus is on guiding you to the answers you need. If we can help, please contact us.
The Latest, from Our Vantage Point
Read our most recent articles. We discuss positioning for a bear market, watching for recessionary signals, making a solid plan in a shifting economy, and more.
Markets are down, prices are up, and the economy is in flux. How are you supposed to plan in an environment like that? We provide some tips.
Special Update: How Investors Can Prepare for Bear Markets
What should you do when stock prices keep dropping? A good start is remembering that the market always moves in cycles. Disciplined investors can use the characteristics of each phase of the cycle—including bear markets—to prepare for the next. Read our insights.
What Defines a Recession? And Is a Soft Landing Possible?
There’s been a lot of talk in financial media lately about whether the Fed can guide the US economy to a “soft landing”: taming inflation without tipping the economy into negative economic growth, or recession. But how do you know if we’re in a recession? And what would a soft landing look like? We explain.
