Bear Markets and What to Focus On
These insights can help you focus on the right things & find the silver lining in bear markets.
Here are the two things we know about bear markets:
We can’t predict when they’ll happen, nor can we predict what will cause them.
We can only figure out those things in hindsight.
That can be unnerving to consider. But here’s the good news.
We can get a lot of peace of mind just from knowing the basics about bear markets—and what to do in light of that.
This month’s Aquila Wealth Newsletter shares some important insights about bear markets. Click here to check it out!
What causes bear markets?
Although we can’t predict the future, we have a good idea about what’s caused past bear markets and the near misses.
In fact, one of the last near misses we had was in October 2018. That’s when the S&P 500 dropped 19.8%. (1) We were just a hair away from hitting bear market territory. So, what caused it? Monetary policy changes and trade uncertainties, for the most part.
Before that was the housing crisis of 2008 and the burst of the dot-com bubble back in 2000. Each of those bear markets lasted more than a year. (2)
Here’s my best takeaway from historical bear markets.
Don’t focus on trying to predict them.
Too many factors are at play.
Bear markets are inevitable, and they’ll eventually cycle back to a bull market. Keep a long-term view, and stay realistic. It’s a good way to avoid hasty decisions.
Feel free to forward this to a friend.
Eric Maldonado, CFP®
San Luis Obispo, CA
Photo by Rasmus Svinding