🕯 Is the bear market over? • 04.26.2023

According to Morgan Stanley’s Wealth Management CIO Lisa Shalett... April 26th, 2023 [Unsubscribe]( [Unsubscribe]( Dear Reader, According to Morgan Stanley’s Wealth Management CIO Lisa Shalett (per her interview on CNN Business), investors have “cause for optimism: markets are soaring, corporate earnings are beating expectations, and employment is strong…” But she also believes “a bigger drop is on its way…” Maybe she’s right… Maybe she’s wrong. In the end, for Market Wizard Larry Benedict, it doesn’t matter which way the market goes… He spent 20 years on Wall Street without a single losing year. He delivered 23％ returns in 2008 (while the market plummeted 37％.) And more recently, he delivered a perfеct track record to his One Ticker Trader readers just last year –– 11–for–11… While the broader markets sank as much as 30％. And he already delivered another double–digit wіnner this year. Nоw, he’s offering a 10–second “over the shoulder” demo of his wіnning strategy in aсtion. [Phоne]( [Watch It Hеre]( Sincerely, Lauren Wingfield Managing Editor, The Opportunistic Trader hat Is a Bear Market? A bear market is when a market experiences prolonged pice declines. It typically describes a condition in which securities prics fall 20 or more from recent highs amid widespread pessimism and negative investor sentiment. Bear markets are often associated with declines in an overall market or index like the S&P 500, but individual securities or commodities can also be considered to be in a bear market if they experience a decline of 20 or more over a sustained period of time—typically two months or more. Bear markets also may accompany general economic downturns such as a recession. Bear markets may be contrasted with upward-trending bull markets. KEY TAKEAWAYS Bear markets occur when pries in a market decline by more than 20, often accompanied by negative investor sentiment and declining economic prospects. 1 Bear markets can be cyclical or longer-term. The former lasts for several weeks or a couple of months and the latter can last for several years or even decades. Short selling, put options, and inverse ETFs are some of the ways in which investors can mae moey during a bear market as prics fall. 0:55 What's a Bear Market? InvestoTrivia Understanding Bear Markets Stock prces generally reflect future expectations of csh flows and profts from companies. As growth prospects wane, and expectations are dashed, prics of stocks can decline. Herd behavior, fear, and a rush to protect downside losses can lead to prolonged periods of depressed asset pries. One definition of a bear market says markets are in bear territory when stocks, on average, fall at least 20 of their high. But 20 is an arbitrary number, just as a 10 decline is an arbitrary benchmark for a correction. Another definition of a bear market is when investors are more risk-averse than risk-seeking. This kind of bear market can last for months or years as investors shun speculation in favor of boring, sure bets. The causes of a bear market often vary, but in general, a weak or slowing or sluggish economy, bursting market bubbles, pandemics, wars, geopolitical crises, and drastic paradigm shifts in the economy such as shifting to online economy, are ll factors that might cause a bear market. The signs of a weak or slowing economy are typically low employment, low disposable incme, weak productivity, and a drop in business profts. In addition, any intervention by the government in the economy can also trigger a bear market. For example, changes in the tax rae or in the federal funds rae can lead to a bear market. Similarly, a drop in investor confidence may also signal the onset of a bear market. When investors believe something is about to happen, they will tae ation—in this case, selling ff shares to avid losses. Bear markets can last for multiple years or just several weeks. A secular bear market can last anywhere from 10 to 20 years and is characterized by below-average returns on a sustained basis. There may be rallies within secular bear markets where stocks or indexes rally for a period, but the gains are not sustained, and prces revert to lower levels. A cyclical bear market, on the other hand, can last anywhere from a few weeks to several months. The U.S. major market indexes were close to bear market territory on December 24, 2018, falling just shy of a 20 drawdown. 2 More recently, major indexes including the S&P 500 and Dow Jones Industrial Average (DJIA) fell sharply into bear market territory between March 11 and March 12, 2020. 3 Prior to that, the last prolonged bear market in the United States occurred between 2007 and 2009 during the Finacial Crisis and lasted for roughly 17 months. The S&P 500 lost 50 of its value during that time. 4 In February 2020, global stocks entered a sudden bear market in the wake of the global coronavirus pandemic, sending the DJIA down 38 from its ll-time high on February 12 (29,568.77) to a low on March 23 (18,213.65) in just over one month. 5 However, both the S&P 500 and the Nasdaq 100 made nw highs by August 2020. 6 Phases of a Bear Market Bear markets usually have four different phases. The first phase is characterized by high prics and high investor sentiment. Towards the end of this phase, investors begin to drop out of the markets and take in prfits. In the second phase, stock prces begin to fall sharply, trading activity and corporate prfits begin to drop, and economic indicators, that may have once been positive, start to become below average. Some investors begin to panic as sentiment starts to fall. This is referred to as capitulation. The third phase shows speculators start to enter the market, consequently raising some pries and trading volume. In the fourth and last phase, stock prces continue to drop, but slowly. As low pries and good news starts to attract investors again, bear markets start to lead to bull markets. "Bear" and "Bull" The bear market phenomenon is thought to gt its nme from the way in which a bear attacks its prey—swiping its paws downward. This is why markets with falling stock pries are called bear markets. Just like the bear market, the bull market may be named after the way in which the bull attacks by thrusting its horns up into the air. Practice trading with virtual moey Find out what a hypothetical investent would be worth toay. SELECT A STOCK TSLA TESLA INC AAPL APPLE INC NKE NIKE INC AMZN AMAZON.COM, INC WMT WALMART INC SELECT INVESMENT AMOUNT 1000 SELECT A PURCASE DATE 5 years ago CALCULATE Bear Markets vs. Corrections A bear market should not be confused with a correction, which is a short-term trend that has a duration of fewer than two months. While corrections ofer a good time for value investors to find an entry point into stock markets, bear markets rarely provide suitable points of entry. This barrier is because it is almost impossible to determine a bear market's bottom. Trying to recoup losses can be an uphill battle unless investors are short sellers or use other strategies to make gains in falling markets. Between 1900 and 2018, the Dow Jones Industrial Average (DJIA) had approximately 33 bear markets, averaging one every three years. 7 One of the most notable bear markets in recent history coincided with the global finacial crisis occurring between October 2007 and March 2009. During that time the Dow Jones Industrial Average (DJIA) declined 54. 4 The global COID-19 pandemic caused the most recent 2020 bear market for the S&P 500 and DJIA. The Nasdaq Composite most recently entered a bear market in March 2022 on fears surrounding war in Ukraine, economic sanctions against Russia, and high inflation. 8 Short Selling in Bear Markets Investors can make gains in a bear market by short selling. This technique involves selling borrowed shares and buying them back at lower pries. It is an extremely risky trade and can cause heavy losses if it does not work out. A short seller must borrow the shares from a broker before a short sell ordr is placed. The short seller’s prfit and loss amount is the difference between the prie where the shares were sold and the prie where they were bought back, referred to as "covered." For example, an investor shorts 100 shares of a stock at 94. The rice falls and the shares are covered at 4. The investor pockets a proit of10 x 100 = 000. If the stock trades higher unexpectedly, the investor is forced to back the shares at a premium, causing heavy losses. Puts and Inverse ETFs in Bear Markets A put option gives the owner the freedm, but not the responsibility, to sell a stock at a specific ice on, or before, a certain date. Put options can be used to speculate on falling stock pries, and hedge against falling pices to protect long-ony portfolios. Investors must have options privileges in their acconts to make such trades. Outside of a bear market, buying puts is generally safer than short selling. Inverse ETFs are designed to change values in the opposite direction of the index they track. For example, the inverse ETF for the S&P 500 would increase by 1 if the S&P 500 index decreased by 1. There are many leveraged inverse ETFs that magnify the returns of the index they track by two and three times. Like options, inverse ETFs can be used to speculate or protect portfolios. 1:27 Tips For Retiring In A Bear Market Real-World Examples of Bear Markets The ballooning housing mortage default crisis caught up with the stock market in October 2007. Back then, the S&P 500 had touched a high of 1,565.15 on October 9, 2007. 9 By March 5, 2009, it had crashed to 682.55, as the extent and ramifications of housing mortage defaults on the overall economy became clear. 10 The U.S. major market indexes were again close to bear market territory on December 24, 2018, falling just shy of a 20 drawdown. 2 Most recently, the Dow Jones Industrial Average went into a bear market on March 11, 2020, and the S&P 500 entered a bear market on March 12, 2020. 11 This followed the longest bull market on record for the index, which started in March 2009. Stocks were driven down by the onset of the COID-19 pandemic, which brought with it mass lockdowns and the fear of depressed consumer demand. During this period, the Dow Jones fell sharply from al-time highs close to 30,000 to lows below 19,000 in a matter of weeks. From February 19 to March 23, the S&P 500 declined 34. 12 13 Other examples include the aftermath of the bursting of the dot com bubble in March 2000, which wiped out approximately 49 of the S&P 500's value and lasted until October 2002; 14 and the Geat Depression which began with the stock market collapse of October 28-29, 1929. What Is a Bear Market? Definition and How to Invest During One Bear markets, when assets plummet 20from recent highs, are among the scariest market events you'll encounter. But long-term investors can stay the course. Alana Benson By Alana Benson  Updated Mar 8, 2023 Edited by Arielle O'Shea   Reviewed by Jody D’Agostini   What Is a Bear Market and How Should I Invest During One? Many or al of the products featured hee are from our partners who compensate us. This influences which products we write about and where and how the product appears on a page. However, this does not influence our evaluations. Our opinions are our own. Hee is a list of our partners and her's how we mae oney. The investing information provided on this page is for educational purposes ony. NerdWallet does not ofer advisory or brokerage services, nor does it recommend or advise investors to by or sell particular stocks, securities or other investments. MORE LIKE THISInvestingStocksInvesting Planning & Strategy The words "bear market" strike fear into the hearts of many investors. But these deep market downturns are unavoidable, and often relatively short, especially compared with the duration of bull markets, when the market is rising in value. Bear markets can even provide good invstment opportunities. Hee's more on what a bear market means, and steps you can take to make sure your portfolio survives (and even thrives) until the bear transforms into a bull. What is a bear market? A bear market is defined by a prolonged drop in invstment pries — generally, a bear market happens when a broad market index falls by 20 or more from its most recent high. The reverse of a bear market is a bull market, characterized by gains of 20 or more. While 20 is the threshold, bear markets often plummet much deeper than that over a sustained period. Although a bear market may have a few occasional “relief rallies,” the general trend is downward. Bear markets are characterized by investors’ pessimism and low confidence. During a bear market, investors often seem to ignore any good news and continue selling quickly, pushing prces even lower. Eventually, investors begin to find stocks attractively priced and start buying, officially ending the bear market. There can be bear markets for a market as a whole, such as in the Dow Jones Industrial Average, as well as for individual stocks. When investors are bearish on an individual stock, that sentiment is unlikely to affect the market as a whole. But when a market or index turns bearish, almost ll stocks within it begin to decline, even if individually they’re reporting good news and growing earnings. » Read more: Hre’s what you need to know when the market crashes The smartest place to shop Copare top investent brokers side-by-side, complete with objective reviews from the Nerds. How long do bear markets last, and what causes them? A bear market often occurs just before or after the economy moves into a recession, but not always. Investors carefully watch key economic signals — hiring, wage growth, inflation and interest rats — to judge when the economy is slowing. When they see a shrinking economy, investors expect corporate profis to decline in the near future. So they sell stocks, pushing the market lower. A bear market can signal more unemployment and tougher economic times ahead. Bear markets tend to be shorter than bull markets — 363 days on average — versus 1,742 days for bull markets. They also tend to be less statistically severe, with average losses of 33 compared with bull market average gains of 159, according to data compiled by Invesco. How to invest during a bear market Video preview image 1. Make dollar-ost averaging your fried Say the prce of a stock in your portfolio slumps 25, from 100 a share to 75 a share. If you have mony to invest — and want to by more of this stock — it can be tempting to try to uy when you think the stock’s prie has cratered. Prblem is, you’ll likely be wrong. That stock may not have bottomed at 75 a share; rather, it could tumble 50 or more from its high. This is why trying to pick the bottom, or “time” the market, is a risky endeavor. A more prudent approach is to regularly add mney to the market with a strategy known as dollar-cot averaging. Dollar-cst averaging is when you continually invest oney over time and in roughly equal amounts. This helps smooth out your purcase rice over time, ensuring you don’t pour al your oney into a stock at its high (while still taking advantage of market dips). There’s no doubt that bear markets can be scary, but the stock market has proven it will bounce back eventually. ADVERTISEMENT Fidelity Fidelity Interactive Brokers IBKR Pro Interactive Brokers IBKR Pro Merrill Edge Merrill Edge NerdWallet rating 5.0/5 NerdWallet rating 5.0/5 NerdWallet rating 4.7/5 Fees 0 per trade for online U.S. stocks and ETFs Fees 0.005 per share; as low as 00005 with volume discounts Fes when you pen a nw, eligible Fidelity account with 50 or more. Use code FIDELITY100. Liited time ofer. Trms apply. Promotion Exclusive! US resident opens a nw IBKR Pro individual or joint account receives 0.25 rae reduction on margin loas. Tiers apply. Promotion Up to 600 when you invest in a nw Merrill Edge® Self-Directed account. Nerdy Tip For long-term investors, a market downturn can simply mean stocks and other investments are on sae. If you're not already investing, you can take advantage with one of our picks for thest ivestment accunts. 2. Diversify your holdings Speaking of picking up stocks at lower prics, boosting your portfolio’s diversification — so it includes a mix of different assets — is another valuable strategy, bear market or not. During bear markets, ll the companies in a given stock index, such as the S&P 500, generally fall — but not necessarily by similar amounts. That’s why a well-diversified portfolio is key. If you’re invested in a mix of relative winners and losers, it helps to minimize your portfolio’s overall losses. If ony you could know the winners and losers in advance. Because bear markets typically precede or coincide with economic recessions, investors often favor assets, during these times, that deliver a steadier return — irrespective of what’s happening in the economy. This “defensive” strategy might mean adding the following assets to your portfolio: Dividend-paying stocks. Even if stock rices aren’t going up, many investors still want to et pid in the frm of dividends. That’s why companies that pay higher-than-average dividends will be appealing to investors during bear markets. (Interested in dividends? See our list of high-dividend stocks.) Bonds. Bonds also are an attractive inestment during shaky periods in the stock market because their prces often move in the opposite direction of stock prics. Bonds are an essential component of any portfolio, but adding additional high-quality, short-term bonds to your portfolio may help ease the pain of a bear market. 3. Invest in sectors that perform well in recessions What investments do well in bear market? Think about the things consumers will need no matter what – those are the sectors that tend to perform well during market downturns. Even amid high inflation, people still need gas, groceries and health care, so things such as consumer staples and utilities usually weather bear markets better than others. You can invest in specific sectors through index funds or exchange-traded funds, which track a market benchmark. For example, investing in a consumer staples ETF will give you exposure to companies in that industry, which tends to be more stable during recessions. An index fund or ETF offes more diversification than investing in a single stock because each fund holds shares in many companies. » Still curious? Learn more about what to invest in during a recession 4. Focus on the long-term Bear markets test the resolve of al investors. While these periods are difficult to endure, history shows you probably wn’t have to wait too long for the market to recover. And if you’re investing for a long-term goal — such as retirement — the bear markets you’ll endure will be overshadowed by bull markets. Moey you need for short-term goals, generally those you hope to achieve in less than five years, should not be invested in the stock market. Still, resisting the temptation to sell investments when markets plummet is difficult, but it’s one of the bst things you can do for your portfolio. If you have trouble keeping your hands of your investments during a bear market, you can have a robo-advisor or a finacial advisor manage your investments for yu, in both the good times and the bad. » Curious about robos? Ceck out our full roundup of the est robo-advisors Ultimately, bear markets are a good time to revisit your goals and objectives and remind yourself of why you’re invested where you are. If your asset allocation feels right, stay the course. If it feels ff, a bear market could be an oppotunity to readjust your accunts while paying less in capital gains than you would during a bull market. Frequently asked questions How can I tell when a bear market is coming? What's the difference between a bear market and a market correction? What’s the difference between a bear market and a bull market? The bottom line on bear markets It can be scary to see stock pries fall 20 or more from a recent high — but the one thing investors shouldn't do is panic. The average bear market lasts less than a year, and investors can mitigate the effects through simple techniques such as dollar-cot averaging, diversification, investing in relatively recession-resistant sectors and focusing on the long-term. » Still worried about a recession? Chck out our guide to finding relatively recession-proof stocks. About the author: Alana Benson is an investing writer who covers socially responsible and ESG investing, finacial dvice and beginner investing topics. Her work has appeared in The Nw York Times, The Washington Post, MSN, Yahoo Finace, MarketWatch and others. Read more What to Invest in During a Recession There’s no such thing as a “recession-proof” invetment, but some types of stocks, funds and strategies could help your portfolio better weather an economic downturn. Sam Taube Chris Davis By Chris Davis  and Sam Taube  Updated Mar 27, 2023 Edited by Arielle O'Shea   Reviewed by Raquel Tennant   What to Invest in During a Recession Many or ll of the products featured ere are from our partners who compensate us. This influences which products we write about and where and how the product appears on a page. However, this does not influence our evaluations. Our opinions are our own. Hre is a list of our partners and hee's how we ake oney. The investing information provided on this page is for educational purposes oly. NerdWallet does not ofer advisory or brokerage services, nor does it recommend or advise investors to by or sell particular stocks, securities or other investments. MORE LIKE THISInvestingStocks The recession alarms have been sounding lately due to bnk failures, stubborn inflation, rising interest rtes and general stock market volatility. In a January 2023 survey by the National Association for Business Economics, a majority of respondents said that the U.S. was likely to enter a recession in 2023. [1] While investing in a recession can be frightening, it doesn’t have to be unnerving — if you know what to look for. Choosing what to invest in during a recession will first require you to consider your personal goals. Are you looking to: Minimize the risks of stock market volatility? Maximize long-term returns? Create a source of fixed incme? Invest in the stock market while pries are low (also known as buying the dip)? Building a portfolio that incorporates ll these strategies may be ideal, but successfully tackling any of them could have a significant positive impact on your finacial future. Nerdy Tip For long-term investors, a market downturn can simply mean stocks and other investments are on ale. If you're not already investing, you can take advantage with one of our picks for the bet inestment accunts. Are we in a recession? It's often said that a recession is defined by two or more consecutive quarters of decreasing gross domestic product (GDP) — which we saw in the first half of 2022. However, the National Bureau of Economic Research (NBER), which is the official "scorekeeper" of U.S. recessions, uses a slightly broader definition. It defines a recession as "a significant decline in economic activity that is spread across the economy and that lasts more than a few months." NBER uses a variety of measures, such as personal incme, employment and industrial production, to gauge recessions. It has not yet announced the beginning of a nw recession. How to invest during a recession While no inestment is guarnteed to be recession-proof, some tend to perform better than others during downturns. These include health care and consumer staples stocks (or funds tracking those sectors), large-cap stocks and incme investments. Health care and consumer staples stocks Companies that sell their shares on the stock market are broken into sectors. Sectors are groupings that pertain to the type of business the company engages in, and there are 11 sectors in total: Communication services. Consumer discretionary. Consumer staples. Energy. Financials. Health care. Industrials. Information technology. Materials. Real estate. Utilities. During a recession, some sectors of the economy tend to outperform others as consumer needs shift. Delia Fernandez, a certifid finacial planner and owner of Fernandez Finacial Advisory in Los Alamitos, California, says both the health care and consumer staples sectors are examples of this. A 2021 study titled "Is Healthcare Employment Resilient and 'Recession Proof'" found health-care hiring remained stable in spite of economic downturns, one indication of how recession-proof the health care market was even before a pandemic-related downturn. [2] The health-care sector includes biotech and pharmaceutical companies. The consumer staples sector includes food and beverages, household and personal products and even alcohol and tobacco. These sectors typically don’t see the rapid growth that others, such as consumer discretionary (household goods and services that are considered more wants than needs, such as apparel, restaurants and uxury items) or information technology, might see in the rebound and recovery phase of a recession. “In any downturn environment, we often look at consumer staples. And those are the usuals, the groceries we by and the stores we uy them from,” says Fernandez. “Because no matter what, you’re buying toilet paper, eventually you’re going to go to the doctor, you’ve got to eat, you’ve got to drink.” WebinarExpertTeam.com brought to you by Inception Media Group. This editorial email with educational news was sent to {EMAIL}. Unsubscrіbe to stоp receiving marketіng communication from us. Plеase add our email address to your contact book (or mark as important) to guarantеe that our emails continue to reach your inbox. IMG appreciates your comments and inquiries. 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