Investopedia: We are Already in a Bear Market

Article by Dana Blankenhorn in Investopedia

It is time for investors to once again learn some lessons about bear markets.

Analysts will insist, during a bear market, that we’re not in a bear market. Why, they might say, the S&P 500 is only down 7% from its high of late September! That’s not even a correction!

No analyst worth his or her six-figure compensation will say we’re in a bear market — which is defined as a 20% peak-to-trough decline — until we’re already out of it.

When stocks are going down, analysts say that we’re experiencing “volatility.” Have you ever noticed that stocks are never impacted by “volatility” when they’re going up? When you see the word, “volatility,” it means stock prices are declining.

Since the beginning of October, a bearish pattern has taken hold.

We may grind a little higher, but the subsequent decline is always sudden and sharp. Both recent attempts to take the market higher have halted about halfway from the market’s high. That’s bearish.

Where you stand in a bear market depends on where you sit on the razor blade of life.

If you’re under 40, sit still. When you can, buy more tech names. You have time. They will rebound.

If you’re 63, like me, you worry. You need to be defensive.

The Bottom Line

The economic future looks gloomy. Inflation and interest rates are rising, international trade is being hindered by nationalism, and no help can be expected from policymakers until people elect new ones after they’ve suffered a great deal of pain. The $1.5 trillion dollar party called the 2017 tax cut must be paid for.

Bear markets like this one are often the preludes to full-blown recessions, defined as two consecutive quarters (or more) of negative growth. I expect a recession in 2019, so I’m battening down the hatches.

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