Charlie Bilello and Peter Mallouk from Creative Planning discuss
"How to invest during a bear market"in light of recent market upheaval.
Over the last 100 years, US bear markets have historically ocurred once every four years on average.
However, we've had four bear markets in the last seven years.
Since 1929, bear markets on average lasted 14 months with a range of 1 month to 33 months.
Corresponding bear market declines averaged -35% with a range of -20% to -86% (Great Depression).
The recent S&P 500 bear market (from 2/19 high to 4/7 low) was the second fastest bear market in history.
Only March 2020 was faster.
The S&P 500 experienced its third largest daily percentage gain since 1950 on 4/9/2025.
Expect big swings to continue for the foreseeable future.
You're far more likely to get punished for market timing during a bear market than at any other time.
The VIX closed above 52 on 4/8/2025.
Since 1990, forward S&P 500 total returns for 1 yr., 2 yr., 3 yr., 4 yr., and 5 yr.
were always positive whenever the VIX closed above 50.
Video
Comments
The circumstances, reasons, and results are different each and every time.
This punk was definitely not lucky!
https://www.youtube.com/watch?v=V7Nci-GVuHE
I'm not saying it's different this time. But I wasn't around for Smoot-Hawley, the McKinley Tariff, or The Tariff of Abominations. I suspect people were stuffing their mattresses with bills and burying specie in the back yard.
If Tariff Theater goes on long enough, I think the question will become what it will take to get people back in the market.
Bear Market Investing: After a drop in an index(es) to bear or near bear territory, and especially after the first Fibo retracement level(s) is achieved, support and resistance levels become clearer. Right now the resistance at the 61.8% retracement level is believed to be very strong, while support at the buffoon put level is tenuous at best.
I recently started a thread on Timely T/A (for the same purpose it appears as this thread) but it does not appear to be of much interest to posters here.
That said, the specific T/A that is provided there has confirmed other research/thinking on where/when we will either SELL more (we SOLD 50% of our stock allocation on March 31) and/or redeploy the proceeds from our recent SELLs. Use of T/A helps take any/all emotion out of our trades. We will start executing the planned BUYs/SELLs in the next few days/weeks as the indexes hit targeted levels for the respective trades.
The author can't guarantee how long it would take to come back to even or how deep the markets would fall.
There are investors who have enough and don't want to lose too much; for them, these generic articles don't have an answer. Most who believe in the above never tried, or tried and failed. It's not easy.
I'm not going to talk about me. There are a couple of traders where we discuss off the board what we do, and these traders have sold prior to every meltdown. What it a miracle? No, it wasn't. But you have to really trade for years to get there. You can't be a successful trader in a matter of days-months.
If you want to do better, start listening to Tom Bowley, he called this decline about 2 months ago, and usually he has been right most times.
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"Since 1990, forward S&P 500 total returns for 1 yr., 2 yr., 3 yr., 4 yr., and 5 yr.
were always positive whenever the VIX closed above 50."
Where is the catch in the above? Smart authors look back in history and play with their numbers to make a statement to fit their narrative.
Why 50? Why not 45 or 40? All mean very high volatility.
The real question is how long it took an investor's portfolio to get back to equal.
If the SP500 was at 5K, went to 2.5K, and a year later it was at 3K, it is still not back to 5K.
This chart (https://schrts.co/chKgGjNr) from 1999 to 2014 shows you several points where VIX was pretty high over 40 in 2002 and 2003. How long did it take the SP500 to get back to even? Several years to 2007. What happened after 2007? Another 50+% decline, this time VIX was over 50, and again, it took years to get even.
Of course, most also know that the more you go down, the more % you need to go up. We also know that investors lose their cool and sell at the bottom. Many have a plan until they get hit in the face. Emotions are the number one problem for investors.
BTW, buy and hold is also a daily decision of not selling. Who can guarantee that all B&H investors are rational and all traders are fools?
Of course not, nobody can.
"Where is the catch in the above? Smart authors look back in history and play with their numbers to make a statement to fit their narrative. Why 50? Why not 45 or 40?"
Maybe because VIX closed above 52 and 50 is a nice, round number?
"Who can guarantee that all B&H investors are rational and all traders are fools?"
Nobody can - there are fools on both sides!
There are very few guarantees when it comes to investing.
However, analyzing probabilities can sometimes be useful.
Here’s one viewpoint I stumbled across tonight:
Janus Henderson fund manager says investors should cut exposure to stocks as recession looms
Opinions are varied. But this guy’s is probably as good as the next guy’s if you’re looking for opinions. Personally I’ve done a lot of buying and selling the past 10 days as various assets swooned and soared. Won some. Lost some. Allocation to stocks is a few percentage points higher now than 2 weeks ago. I’m weighted heavily towards resources / real assets and away from the big S&P names. Also weighted towards non-U.S.
Smoot-Hawley precipitated the Great Depression. My parents were kids at the time. I grew up hearing horrible stories of people without food or heat in their homes and how depressed folks were. How hopeless life seemed with so few jobs and meager pay if you could find work. Farmers dumping gallons of milk and destroying crops because nobody could afford to buy it from them. If we get to that point again all bets are off. But I don’t think our society would cope as well as folks did in the 30s.
Remember, if risk/volatility/unknown/uncertainty is very high, there is no way to predict short term movements.
You don't want to short either.
The only good solution is to sell a big portion to MM, at least 20-30%.
Other good choices is to be a flexible open minded investor and look at funds/ETFs that worked better YTD, like GLD and ALT funds.
IMO, it's too late to make changes now.