Our Finance Guide
  • Home
  • Loans
  • Tax
  • Credit Cards
  • Investing
No Result
View All Result
  • Home
  • Loans
  • Tax
  • Credit Cards
  • Investing
No Result
View All Result
Our Finance Guide
No Result
View All Result
Home Uncategorized

The 2 Types of Bear Markets

admin by admin
May 13, 2022
in Uncategorized
0

Related articles

Top 5 Best Ethereum Wallets for 2022

The Best Investment Strategy For This Market

A reader asks:

Lately, we hear the terms “soft landing” and “hard landing” regarding the Fed actions. Can you explain what these two phrases mean in market terms?

A couple of months ago I looked back at every inflationary period going back to the 1940s:

There’s a theme here. This is what I wrote at the time:

Inflationary spikes don’t cause every recession but every inflationary spike has only been alleviated by a recession.

Each time inflation went over 5% in short order there was a recession either right away or in short order.

A hard landing would be the Fed raising interest rates so high to fight inflation that it pushes us into a recession.

A soft landing, on the other hand, would see the Fed raising interest rates just high enough to bring down inflation but not so much that it causes an economic contraction.

This is what former Fed chair and current Treasury Secretary Janet Yellen said about this today:

All of those things suggest that the Fed has a path to bring down inflation without causing a recession, and I know it will be their objective to try to accomplish that.

Yellen says a soft landing is possible.

History shows a soft landing with inflation this high has never happened before.

Choose your fighter.

As far as the market implications go, the U.S. stock market is effectively already in a bear market. The S&P 500 is down 19% or so from all-time highs.

The question is: Will the U.S. go into a recession or can the Fed thread the needle and orchestrate a soft landing?

First up, these are the bear markets that happened in and around a recession going back to the Great Depression:

The biggest crashes in history have been caused by recessions. This makes sense when you consider people lose their jobs during a recession. Companies go out of business. People lose money and stop spending as much.

It doesn’t take a genius to figure out why the stock market tends to fall a lot during a collapse in economic growth.

Bear markets tend to coincide with economic contractions but there have been plenty of bear markets that occur outside of a recession. A recession is not a prerequisite.

I count 11 non-recessionary bear markets over the past 90+ years:

Here’s the tale of the tape:

The obvious takeaway here is bear markets that occur outside of a recession tend to be shallower and less lengthy while recessionary bears are greater in both magnitude and time.

If you think the Fed can keep us from going into a recession, we may be closer to the end than the beginning of this bear market.

If you think the Fed has no chance of side-stepping a slowdown, there could be more pain ahead.

It is worth mentioning not every recession in history leads to a bone-shattering crash. The bear markets in 1990, 1980-1982, 1961-1962, 1957 and 1948-1949 were all losses of less than 30%. It is possible to have a recession that leads to a relatively minor bear market.

Regardless of how things shake out in the economy, the one thing no one can predict is the actions of investors.

The run-up in prices following the pandemic crash was massive. The pendulum could always swing too far in the other direction if investors really panic.

Or we could bottom today. Who knows.

The hardest part about bear markets is no one knows when they will come to an end.

The good news is they do always come to an end at some point. You might just have to be patient to see how this one plays out.

We talked about this question on this week’s Portfolio Rescue:



Barry Ritholtz joined me to discuss the 4% withdrawal rule in retirement, changing your asset allocation, the Fed and how new investors should think about bear markets.

[Read More…]

admin

admin

Related Posts

Top 5 Best Ethereum Wallets for 2022

Ethereum is one of the most widely-used blockchains available today. Thousands of crypto projects are built on the Ethereum network, with hundreds of billions of dollars...

The Best Investment Strategy For This Market

A reader asks:I’m 50-years-old and just started investing for the first time in February of this year. Was promptly kicked in the private parts as a...

14 Major Employers That Offer Part-Time Jobs With Great Benefits

Think you need to work long hours to qualify for company-backed retirement plans, tuition reimbursements and affordable health insurance?Actually, you don’t have to have to be...

How to Get 8 More Free At-Home COVID Tests From the Government

If you already got your first two rounds of free at-home COVID tests from the federal government, you can now order eight more free tests for...

The 5 Ws (and 1 H) of asking for your first raise

Asking for a pay raise can be intimidating, especially if you’re doing it for the first time. As someone who is freshly making their way in...

Next Post

What Is Forbearance Steering and How to Get Help

Coinbase vs. Gemini™: which crypto exchange is best for beginners?

Right Now, But Wrong Later

No Result
View All Result

Subscribe Us

By clicking subscribe, I authorize: (1) Our Finance Guide to use and share my information in accordance with its Terms of Service and Privacy Policy, and (2) Our Finance Guide or third-party companies, including Our Finance Guide’s business partners, to contact me by email with offers for goods and services at the email address provided. Please note that the information you have provided to us may be supplemented with additional information obtained from other sources.

RECOMMENDED

These YouTubers have nearly 50 credit cards and millions of points—here are their tips for getting the most out of your cards
Credit Cards

From travel rewards to balance transfers, here are our favorite Citi credit cards By Jennifer Yellin

Uncategorized

What Is an HSA? How to Get the Most Benefit From Your Health Savings Account

CATEGORIES

  • Credit Cards
  • Investing
  • Loans
  • Tax
  • Uncategorized

Subscribe Us

By clicking subscribe, I authorize: (1) Our Finance Guide to use and share my information in accordance with its Terms of Service and Privacy Policy, and (2) Our Finance Guide or third-party companies, including Our Finance Guide’s business partners, to contact me by email with offers for goods and services at the email address provided. Please note that the information you have provided to us may be supplemented with additional information obtained from other sources.

© 2022 Our Finance Guide, All Rights Reserved.

  • Contact Us
  • Privacy Policy
  • Terms Of Service
  • Unsubscribe
No Result
View All Result
  • Home
  • Loans
  • Tax
  • Credit Cards
  • Investing

© 2022 Our Finance Guide, All Rights Reserved.