It’s Hard to Predict Bear Markets

A recent Vanguard blog discusses the challenges faced when trying to predict a market downturn. “While all bear markets involve a loss of investor confidence,” it says, “an assortment of factors can cause them,” including change in monetary policy, political events, and overvalued stocks. Even if you could predict such factors, the article argues, it’s hard to tell how they would affect equities. The article illustrates the differences between the last two bear markets—namely, the… Read More

Tools You’ll Need for the Next Bear Market

By John Reese (@guruinvestor) —  Hoping for the best but preparing for the worst is a good rule-of-thumb, a maxim that can help us stay measured and mindful when it comes to dealing with life’s inevitable ups and downs. But it can be hard to think about potential downs when the ups have been around for a while—and the current, nearly nine-year-old bull market is a perfect example of that. Since March of 2009, the… Read More

Ken Fisher on Bull Market Dips Versus True Bear Markets

In a recent USA Today article, famed investor Ken Fisher offered advice on how to discern between a bear market and a bull market “blip”: Referring to the market dip that occurred earlier this month, Fisher advises, “If you’re fully invested, sit on your hands. Hard! For cash holders this action prescribes buying. Always stay cool. Fight any urge to sell. It’s all signaling more new highs ahead.” Bull markets, says Fisher, “don’t end this… Read More

Shiller Tracks Past Bear Markets

In a recent article for MarketWatch, Yale professor and Nobel Laureate Robert Shiller shares insights on past bear markets in the U.S. and how the current market environment resembles the periods preceding them. Citing the “conflicting messages” of “high valuations following a period of strong earnings growth and very low volatility,” Shiller shares data he collected by reviewing 13 U.S. bear markets since 1871 (a drop in the market by at least 20%) regarding each… Read More

Jason Zweig Says Active Managers Also Underperform in Down Markets

Although the data continues to show that stock pickers have underperformed the market, writes Jason Zweig in a recent Wall Street Journal article, “active managers insist that they will make a comeback.” The article cites data provided this month by Bank of America Merrill Lynch that shows “63% of active fund managers investing in large U.S. stocks outperformed their benchmarks in April, the best since February 2015.” Active managers, writes Zweig, claim that the pricey… Read More

A Market Correction May Be Good Medicine

Although stock prices have tripled during the eight-year bull market, there have been only four corrections, and some investors think a period of decline might not be so bad. This according to an article in last week’s Wall Street Journal. The view of many analysts and investors, according to the article, is that the “postelection rally that has driven the S&P 500 up roughly 10% has cleaved share prices from the underlying fundamentals that tend… Read More

Morningstar on Preparing for Bear Markets

There are no hard-and-fast rules for determining whether value or growth stocks will suffer the most during a bear market, writes Morningstar senior analyst and CFA Kevin McDevitt. “No two bear markets are the same,” writes McDevitt, “and the catalysts behind them tend to change. There is usually one sector that gets hit particularly hard, but it is difficult to anticipate which one it will be.” He offers the following historical data: McDevitt explains that… Read More

Zweig: Buy in a Market Bust like John Maynard Keynes

Anyone who has studied economics will be more than familiar with the name John Maynard Keynes. In last week’s Wall Street Journal, Jason Zweig reports that new research is offering information about how the investment success of this great economist “should teach all investors the importance of preparation, courage and patience.” Before his death in 1946, Keynes wrote several books that, according to Zweig, “revolutionized economic policy and helped devise the modern global monetary system.”… Read More

Glassman: Worrying About the Next Recession Won’t Help

The tenacity of the current bull market begs the obvious question as to when it will end and, as we approach the election, uncertainly is heightened by recent lackluster GDP reports. In a recent issue of Kiplinger, James Glassman points out that although Americans consider the economy the nation’s “most important problem by far” (according to a Gallup poll), “you may be surprised to learn that the U.S. is currently in the midst of its… Read More