No matter the short-term noise, stick to your financial plan and stay calm.
Recently, in California, a black bear weighing over 500 pounds, named Hank the Tank, was ransacking homes and causing panic. Some worry that he is foreshadowing a larger bear market lurking in Wall Street’s midst. After all, inflation is at a 40-year high, supply chains are still clogged, Russia has invaded Ukraine and the Fed may hit the brakes on its accommodative monetary policy.
Should investors worry about a Hank the Tank?
History is a Guide
Bear and bull markets happen. When the market sours or slumps, don’t believe talk that this time it is different. History shows us that it’s not.
Since 1928, there have been 28 bear markets, with an average decline of 35.62%. The average bear market lasts 289 days, with an average of 3.6 years between them. Bull markets, on the other hand, last an average of 991 days. If we take a look at more recent history, there have been five bear markets in the last 30 years.
The longest bear market in history? The Hank the Tank of bear markets? It lasted 61 months, from March 1937 until April 1942 (The Great Depression). This was one of several bear markets that happened leading up to and going through World War II.
The last bear market? It started on February 19, 2020 (COVID-19 pandemic), lasted 33 days, and the market went down 35.62%.
When markets decline, they do so rapidly and painfully. The subsequent recovery is slow and uneven, but it does inevitably happen. A long view reveals that markets have always grown past previous highs after a dip.
This Time is Not Different
There are no investment strategies that give you the market’s ups and avoids the downs, save for luck. Fear and greed are irrational emotions that can influence your investment decisions.
Of course, it is hard to stay patient and hold when Wall Street analysts, investment gurus and financial TV pundits spout endless gloom and doom at the troughs, and exuberant optimism at market peaks. Short-term thinking like this only guides you to do the wrong things at the wrong time.
Therefore, it helps to speak with your Wealth Advisor – someone to cool your head when irrational exuberance strikes and encourages you to stick to your plan in the face of volatility. No matter what the markets are doing, assure yourself that this time is not different, and you have a strategy in place for your individual timeframe. At Biondo Investment Advisors, we dedicate ourselves to help you when a speed bump rises, ease you over it and be prepared if there is another speed bump – another Hank the Tank – along the way.
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