In Markets "In a Nutshell"

Markets “In a Nutshell” for July 5, 2022

Investment Week at a Glance

Stocks finished lower for the week.  The Dow Jones Industrial Average fell 1.30%, the S&P 500 was down 2.20%, and the NASDAQ fell 4.10%. Foreign stocks (MSCI EAFE) were up, rising 5.30%.  Bond prices were up for the week, with the 10-year U.S. Treasury ending the week at 2.89%.  (Data source: Wall Street Journal)

Slowdown Ahead for Economy?

As recession worries continue to pick up, the market continues to price in the likelihood of a recession. Yields have been on the decline as the 10-year treasury yield is now down over 0.60% in just the past 3 weeks. Many believe with yields coming down that can mean a slowdown in the economy is coming down, or it could also mean inflation is believed to have peaked and should start to come to more reasonable levels. The equity market would signal we are going into a period of slowdown because the defensive sectors have outperformed recently. Consumer staples, which are companies that provide goods consumers must have, are down 7% for the year. Consumer discretionary stocks, which are goods the consumer buys when they have extra money, are now down 33% for the year. This shows the fear in the market that the economy could be in a recession in the coming 12 months.

Navigating Bear Markets

While going through a bear market is never fun, it is expected. Bear markets are not that uncommon and we should remember that the average bear market since 1950 has returned -34% compared to the average bull market which has returned 167%. Bear markets also allow investors to rebalance their investments and make sure their portfolios are at the right risk levels. Investors also now have an opportunity to buy the same equities, just at a lower price than they could have months ago. Investors should always be prepared to get through bear markets and understand that is part of the business cycle. Investors should always stick to their long-term goals and base their allocations on their risk tolerance, not how the market is performing at one point in time.



How many bear markets have we seen since 1929? (Scroll Down for Answer)

  1.    21
  2.    26
  3.    34
  4.    42



















Answer below.



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2.     26.  The US stock market has seen 26 bear markets since 1929. It has taken a little less than 2 years on average to recover losses in a bear market, but most recently in 2020 we saw the bear market last only 33 days.