When Stocks Will Recover: (Maybe) in These Four Stages

An article in Morningstar describes the four stages that a typical bear market experiences and discusses them within the context of the coronavirus-related downturn. Stage 1: Recognition. “This market achieved stage one during its third week. Stocks were up slightly for the year, before suddenly dropping 11% in the last week of February.” Stage 2: Panic. “This occurs when shareholders realize that the standard advice failed. Buying on the dip wasn’t easy money, as it… Read More

The Next Bear Market Could See a 35% Dip in Dow

In a recent article for MarketWatch, columnist Mark Hulbert explains that the severity of the next bear market has become a pressing question of late, “since Wall Street has shifted from whether a U.S. recession will occur in the next 12-18 months to when.” To determine whether the severity of the next bear market could be predicted, Hulbert analyzed all 36 bear markets since 1900 (data from Ned Davis Research). His findings are charted below:… Read More

Ray Dalio: Investors Unprepared for Next Bear Market

At the Greenwich Economic Forum last November, Bridgewater Associates founder Ray Dalio expressed concern that most stock investors are ill-prepared to handle the next bear market. This according to an article in Chief Investment Officer. Dalio, who said that the current bull market was driven by the Fed’s low interest rates, said “everybody’s sort of leveraged long,” adding that, “if you have a downturn, there’s not much ability for that downturn to be dealt with… Read More

How to Survive a Bear Market Attack

A recent article in Advisor Perspectives discusses how investors can protect themselves from a bear market (defined as a 20% or higher decline in stock prices). The article offers the following advice: “Run from recessionary bears and stand your ground against others.” As the bull market continues, it says, many a watchful eye are focusing on the yield curve, economic data or “anything to try to get an edge on when to exit the stock… Read More

How This Emerging Market Selloff is Different

A recent article in The Wall Street Journal addresses the current selloff in emerging markets stocks and how it differs from past routs. “The deepening selloff in emerging markets this year,” the article reports, “is one of the biggest of the past decade—and differs in ways that highlight how the developing world has changed.” The current environment, it says, was triggered by rising interest rates and trade tensions along with other shifts, including the emergence… Read More

Hussman Predicts Sharp Stock Market Plunge

John Hussman, president of Hussman Investment Trust, predicts that the end of the current economic cycle will result in market losses of approximately 64% for the S&P 500 and 69% for the Dow. This according to a July article in MarketWatch. Hussman, known for predicting the market collapses of both 2000 and 2007-2008, is described as a “permabear” based on what the article calls his “oft-repeated mantra for ‘overbought, overvalued, overbulllish’ as the bull market… Read More

Lessons Learned Since the Financial Crisis

By John Reese (@guruinvestor) —  It’s been over a decade since the financial crisis that led to the deepest economic downturn since the Great Depression, one that pulled the financial rug—and jobs– out from under nine million people and led to foreclosures on approximately eight million homes. Berkshire CEO Warren Buffett—who was born in 1930—appreciates the lessons learned by both events, so much so that in the hallways of his company’s Omaha, Nebraska headquarters he… Read More

Bear Market Would Deliver Death Punch to Active Funds

A recent Bloomberg article warns that, while active fund managers are tempted by the thought that a market downturn would allow them to showcase their talents to investors—that a “human hand” is better than the ‘dumb’ passive funds that investors have favored—”it would actually be the worst possible situation for them and likely result in a messy and hurried consolidation of the entire industry like nothing we’ve seen before.” The article asserts that the such… Read More

Signs that a Bear Market May Be Coming

A recent article in Barron’s reports that while a flattening yield curve is “no reason to bail out of stocks,” bond yields could provide investors with “a sell signal in the years ahead.” A flattening of the yield curve occurs when short-term bond yields rise faster than long-term yields, which can happen, the article explains, if investors “think the Fed is making a mistake” in hiking interest rates and may have to reverse its course.… Read More

Hedge Funds Waiting for the Next Bear Market

“No  one is more eager for the next bear market than long-short hedge funds,” reports a recent Bloomberg article. These funds, the article explains, are not designed to keep up with the bull market. “Instead,” it says, “their ability to short stocks provides shelter during the occasional bear markets and by extension less volatility and higher risk-adjusted returns than the broad market over time.” Over the last nine years, however, these funds have lagged the… Read More