There’s a Bear Coming Towards Us in the Road – But is it a Teddy Bear or a Grizzly Bear?

As we have discussed in previous blog posts, we are in an historically long bull market. The current market recovery started roughly March of 2009 and now continues into a 98th month. Given that the average bull market lasts somewhere around 48-60 months, this one is well above the norm for length. Does this mean that a bear market is imminent? Not really. But we do feel you can see a bear in the road out in the distance. It isn’t charging towards us yet and isn’t clearly visible, but odds are it is coming towards us. The question is whether that bear in the road is a little Teddy Bear or a great big Grizzly Bear.

On average, bear markets last about 18 months and have an average drop of 40%. However, those are averages. Some bear markets have been longer and with larger drops (grizzly bears) while some shorter and with smaller drops (teddy bears). Here are some examples from bear markets over the past 60 years or so:

1950’s:                 6 months and 22.3% drop (Teddy)

1960’s:                 19 months and 29.3% drop (Grizzly)

1970’s:                 21 months and 42.6% drop (Grizzly)

1980’s:                 3 months and 29.8% drop (Teddy)

1990’s:                 No Bear in sight – bear market started in 2000

2000’s                  24 months and 44.7% drop (Grizzly) 2000-2002

                              16 months and 51% drop (Grizzly) 2008-2009      

So, in the first decade of the 2000’s we had two major and significant grizzly bear markets. Now it has been eight years since the last one and it is prudent to expect another bear on the horizon. Whether it will be a Teddy or a Grizzly, we do not know. However, we suggest preparing your portfolio for the eventual meeting with that bear. By implementing strategies now to minimize the impact of that meeting, you can help preserve your nest egg and have a secure retirement.

 As we design portfolios to consider a potential bear market, we use a variety of approaches that are based on the individual needs of our clients including: active management strategies, our own passive plus models, matching asset allocations to your risk score and utilizing risk management tools. If you would like an independent, object portfolio analysis please contact us.