Watch out for the grizzly conditions of bear markets
Brad McMillan is the Chief Investment Officer for Commonwealth Financial Network. He’s a regular media commentator for CNBC, Bloomberg and The Wall Street Journal. He’s also the author of the Independent Market Observer. This is the first of three posts recapping Brad’s recent talk with Infinitas and Pegasus clients.
It’s not uncommon for a client to ask about the risk of a bear market. Often, the rocky financial landscapes we saw in 2000 and 2008 are still fresh in their minds.
Brad McMillan, the Chief Investment Officer for Commonwealth Financial Network, recently met with some of our clients in Kansas City. He talked about bear markets and defined them as periods of decline where stock prices fall 20 percent or more.
Brad and his team took a look at all bear markets in the last century and found there were ten. Two of those markets quickly bounced back within a year – 1962 and 1987. It took the other eight markets years to claw their ways back.
During his talk, Brad shared some common factors of bear markets. He encouraged investors to keep an eye out for:
Recessions – The eight bear markets that lasted longer than a year all had recessions. The economy slowed, profits went down, consumer and business confidence declined, and stock market valuations decreased.
Oil prices – Four of the 10 bear markets saw spikes in the price of oil
Valuations – Five of the 10 had pricey markets
Interest rates – Four of the 10 saw the Fed raise interest rates
While these four conditions aren’t a factor now, Brad said he sees potential for turbulence in the next 18 to 24 months. He said the key to navigating bumps is staying aware of what’s on the horizon and talking with your advisor about putting a plan in place.
Want to learn how to potentially shield your portfolio from being ensnared by a bear market? Let's talk. Email me at [email protected].
Read another recap of Brad’s recent Kansas City talk. In the coming weeks, we’ll share more highlights of his presentation.
Pegasus Capital Management is part of the Commonwealth Financial Network, an independent broker/dealer.