Facing Down a Bear

Tools and strategies for challenging market conditions. [Morningstar](?utm_source=eloqua&utm_medium=email&utm_campaign=newsletter_improvingfinances&utm_content=36837&elqTrackId=956caaf47fcf4026a220d3a04e458f14&elq=a21a8fced3874a0bb9a3420a0efb27ca&elqaid=36837&elqat=1&elqCampaignId=17232) [Improving Your Finances] Improving Your Finances with [Christine Benz]( [Christine Benz] On Monday, the S&P 500 closed in bear-market territory—defined as a decline of 20% or more-- for the first time since March 2020. The Nasdaq was already there. As much as we might tell ourselves that we’ve been here before and that stocks have recovered, we haven’t been here here. The fact that technology stocks have borne the brunt of the sell-off is reminiscent of the early 2000s, but we weren’t simultaneously contending with soaring interest rates and inflation as we are today. Interest rates jumped in 1994, but unlike the Fed’s current campaign, it wasn’t part of a protracted series of rate hikes. Stocks sank even further in 2007-2009 than they have so far this year, but high-quality bonds were superb ballast. This time around, not so much. History rhymes, but it doesn’t repeat. The good news is that even though each bear market is different, we don’t have to reinvent the wheel to know how to respond to them. First, it helps to take the long view: Even with the recent declines, U.S. stocks have still gained an annualized 10% over the past 3- and 5-year periods, and 13% over the past 10. And as [Sandy Ward recently wrote]( corporate earnings remain robust despite the chatter about recession. Second, as with all challenging situations, it helps to focus on what you can control: That means [your savings rate]( (or [spending/withdrawal rate]( , if you’re retired) and your mix of safe and aggressive investments. Regular readers know that I’m a believer in holding enough safe investments to tide you through weak market, and that’s especially important if you’re retired or have spending needs that are close at hand. I recently surveyed [the best account types for very short time horizons]( and Susan Dziubinski rounded up [the best short-term bond funds and ETFs](. Managing for taxes also falls within your sphere of control: I recently wrote about how both [tax-loss harvesting]( and [Roth conversions]( are a way to find a silver lining in a weak market environment. If you’re retired –especially newly retired--the fact that we’re now in bear-market territory may be especially nerve-racking. In a session at the Morningstar Investment Conference last month, PGIM’s David Blanchett, blogger Karsten Jeske, Jeff Ptak and I talked all aspects of retirement planning. We’re featuring the conversation as [our Long View podcast this week]( you can also read the transcript if you’re not a podcast person. With warm regards, Christine Benz [Christine Benz, David Blanchett, and Karsten Jeske: The State of Retirement Income]( Three researchers discuss some of the key challenges for retirement planning: inflation, longevity protection, and safe withdrawal rates in a volatile market environment. [Listen Now]( Share: [facebook]( [twitter]( [linkedin]( ADVERTISEMENT [media]( [media] [Cheap(er) Roth Conversions Are a Silver Lining in Falling Market]( Depressed balances reduce the taxes you'll owe to convert. [Read More]( [Why Index Funds and ETFs Are Good for Retirees]( Low costs and tax efficiency are obvious pluses, but so are ease of oversight and cash flow extraction. [Read More]( [ABCs of RMDs]( What you need to know. [Watch Now]( Listen Now Get the latest investing insights and market updates with [Morningstar’s podcasts]( available on your iPhone, iPad, Android, PC, or smart speaker. Stay connected: [twitter]( [facebook]( [linkedin]( [instagram]( [YouTube]( [Apple News]( [View online]( | [See all newsletters]( | [Share your feedback]( [Unsubscribe]( from this newsletter. Or update your [email preferences](. © 2022 Morningstar, Inc. All Rights Reserved. 22 W. Washington St. Chicago, IL 60602