2023 EP0624 | Financial Updates | Is The Bear Market Over?

We want you to plan for success. Welcome to Planning Matters Radio. Peter, good to see you.

I have an important question. Is the bear market over? I'm asking because the S&P recently climbed more than 20% from a 2022 low. The markets have certainly been on an upswing, but I'd like to know how you define a bona fide bull market. I'm seeing some experts who follow the 20% rule, but others consider it to be a false signal.

So what metrics are you looking for? Yeah, that 20% threshold is one that is utilized to measure both a bear and a bull market. A bear market is a drop from a previous high point of 20% or more.

We've seen 17 of those in the last 100 years, and most of them are significantly more than just 20%. And then, on the other hand, we all appreciate a bull market, a good market rally. A bull market is an increase of 20% or more in market values from a previous low point. So since October of 2022, the markets have given us a nice reprieve from the volatility and have come back significantly, and we all appreciate that as investors, I think. The recent rally in the S&P, though, has been led by a small group of tech stocks propelled by the hype surrounding artificial intelligence. Here's a look at that from Finviz, which shows everything year to date. So the average individual stock, though, on the S&P has risen less than 3%.

So for those who believe the bear market is over, are they missing the bigger picture? Well, so you do have to understand the weighting of how the market index works, right? This is an amalgam of 500 companies, if we're talking about the S&P 500, and the value of those companies can vary widely. So if we've got a trillion dollar Apple company that goes up just 1%, that $10 billion in gains could offset the losses and be more than the losses of 300 other smaller companies. So, yes, the tech giant companies have certainly benefited and risen more than the companies on hold.

And because of this enthusiasm about AI, that has been one of the things that has really led to that rise in value. But you have to understand the weighting of how these indices work and that just a handful of companies could really shape the direction of the market on hold. And for the average investor who is using ETFs or mutual funds, which is a broad collection of different companies in one investment, usually those giant companies are included in a lot of different fund options. So they benefit if just a few companies do increase in value.

Right. Now, hedge funds and many other investors made big bets on the S&P falling. There's still a lot of cash sitting on the sidelines right now.

Does a defensive position still make sense? Well, I think that we're not completely out of the woods yet. Again, we've appreciated this reprieve and this market rally, but I think we still face some headwinds. And more importantly, maybe then, hey, is the economy on hold still more defensive or aggressive? And how should we be with the economy on hold?

It is up to us as individuals. If I am 60 years old and on the verge of retirement, I think that it is probably appropriate to be a little bit more defensive. On the other hand, if I am 30 years old, I should probably be more aggressive, not only in the investment choices that I have within my allocation, but saving as much as possible. Saw a recent article that 64 percent of Gen Xers have stopped saving for retirement at all. These are people born 65 through 1980.

They are 56 through about 43 years old. They need to be saving as much as possible, as aggressively as possible to get ready for retirement. The stats said that 56 percent had less than $100,000 saved for retirement. Let's hope that most of those are on the younger edge of that generation, but that 22 percent had nothing saved at all. We really need to be saving aggressively and investing aggressively where possible. Inflation definitely playing into that, but you're right. And college debt. They have about 40 percent of that $1.3 trillion in college debt that's still weighing on their backs as well.

So that leads to my next question, though. Do you think that we will still see a recession this year? Yeah, I don't think that we are out of the woods.

And again, I have appreciated the market bouncing back and recovering some of the losses from 2022, who as an investor wouldn't. But we are coming into what is certain to be a rather divisive political season and an upcoming election cycle. We're on the leading edge of that.

And who knows what fun surprises that will bring. And the financials still are not showing that we are on solid, solid footing and ground either. And $32 trillion in debt and a lot of things that I just I feel like we are still going to face some headwinds. And that's going to remain true regardless of conditions throughout time.

We are going to see market cycles and there will be good times during bad market cycles and bad times during good market cycles. That's that's the way the market works. All right. Well, I still appreciate being able to talk through all these headlines because it can be overwhelming sometimes. If somebody has questions about anything they're hearing, Peter, how can they get a hold of you?

Yeah. Give us a call. Nine one nine three hundred five eight eight six nine one nine three hundred five eight eight six or you can visit online. Rashaan planning dot com.

It looks like rich on planning dot com. It is my last name, Peter Rashaan. Look forward to hearing from you if you've got questions. All right, Peter, thank you.

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