Bull markets are born on pessimism
They grow on skepticism
They mature on optimism
They die in euphoria
-Sir John Templeton
Value investor Shelby Davis once said, “You make most of your money in a bear market; you just don’t know it at the time.” For those who may not have noticed, we are in a bear market in 2022, so let’s dive just a bit deeper into how to make money in a bear market.
So, what has happened so far this year: The S&P 500 fell 23% from the beginning of the year until late June. The market then rallied up dramatically only to fall again to a lower low in the middle of October. Now we are up 10% from the October low.1 It’s crazy. Who wants to try and play the timing game? Not me. So, is this the beginning of a new bull market? Are we in a bear market rally? You and I both know, there is no telling. We will only know in retrospect.
In our view, you must be prepared for every decision you make to look wrong tomorrow, since we have no idea how long the market decline will last. Here at CI Doyle Private Wealth, we are fine with that as long as these decisions are proven right several years out.
Another comment comes from Benjamin Graham who said, “The primary reason many individuals fail as long-term investors, is that they pay too much attention to what the stock market is doing currently.”
Rather than look at what the stock market is doing currently, let’s look back just a couple of years to January 2020. Did you see that the S&P 500 has gone from 3,230 to around 4,000 today?2 You may also like to know that earnings and dividends have increased in this two-year period.
Investing or staying invested during a bear market is one of the disciplines that all patient investors must master. As Warren Buffett is often quoted to have said, “The stock market is a device to transfer money from the impatient to the patient.”
1,2 Bloomberg, LP.
This information is for educational purposes and is not intended to provide, and should not be relied upon for, accounting, legal, tax, insurance, or investment advice. This does not constitute an offer to provide any services, nor a solicitation to purchase securities. The contents are not intended to be advice tailored to any particular person or situation. We believe the information provided is accurate and reliable, but do not warrant it as to completeness or accuracy. This information may include opinions or forecasts, including investment strategies and economic and market conditions; however, there is no guarantee that such opinions or forecasts will prove to be correct, and they also may change without notice. We encourage you to speak with a qualified professional regarding your scenario and the then-current applicable laws and rules.
Different types of investments involve degrees of risk. Future performance of any investment or wealth management strategy, including those recommended by us, may not be profitable, suitable, or prove successful. Past performance is not indicative of future results. One cannot invest directly in an index or benchmark, and those do not reflect the deduction of various fees which would diminish results. Any index or benchmark performance figures are for comparison purposes only, and client account holdings will not directly correspond to any such data.
Our clients must, in writing, advise us of personal, financial, or investment objective changes and any restrictions desired on our services so that we may re-evaluate any previous recommendations and adjust our advisory services as needed. For current clients, please advise us immediately if you are not receiving monthly account statements from your custodian. We encourage you to compare your custodial statements to any information we provide to you.