This Statistic Should be on Everyone’s Radar when it comes to Stocks

Bear

Business Insider published something last week that is a little worrisome when it comes to stocks.  These are the clues that you look at to try and determine what might be occurring.  The article was referring to the fact that the stock market had declined more than 10% from last year’s high point which is a correction.  Unfortunately, that also happened last summer.  The problem is that these two 10% corrections happened so close together.

Here is what the article had to say:

This is the second time in the past six months that this has happened — remember, stocks fell 10% in August in just a few days — and these two corrections in such a short time don’t look good, historically.

Any single correction isn’t, in and of itself, a problem, but the speed with which stocks dropped into correction territory almost back-to-back has been seen only three other times in the past 100 years.

And these are not years that market historians want to hear: 1929, 2000, 2008. In 1929, the Dow Jones started a decline that lost -86% in the value.  In 2000 and 2008, the market were in bear markets that resulted in losses over -50%.

That is one of those 100% statistics to go along with a long list of indicators that would suggest the probabilities are high that we are in a bear market.  Now Pop Culture Finance will tell you to not take any action to protect yourself and to just ignore it.

This would be like a meteorologist warning the TV audience of a Category 5 hurricane and then telling them not to do anything.  It is an interesting comparison.  With a hurricane, you are forecasting the potential of one hitting land from the indicators.  The same goes with a bear market.  Yet, with a hurricane they tell you to take precaution.

Due to the risk that is building in the market, I am opening up my schedule this Friday January 29th to anyone who wants to call my office and ask about their portfolio whether it be with a financial advisor or a 401 K plan.  I am a little limited to the specific advice I can give due to the 20-minute time allotment.  However, I can point you to resources and give you general advice.  I am scheduling 20-minute phone conferences.  If you want an opinion, send an email to ASK BOB  and I will get you on the schedule.

  • Philip Belier

    Beware of any investments into a “Bear Market”. Lost a considerable amount of my retirement money with a bear market investment. This was a knee-jerk choice by me after the 2008 bottom. If I would have been patient and just rode out the market, I’d recouped it all and made money. I’m also still down $10,000 on a guaranteed “long term” 6% return on a REIT given to me by a fee-based advisor along with the bear market option.

    In my experience, a no-load investment company like T Rowe Price with free advise would be a better choice than a fee-based investment advisor. The fee-based advisor’s educated guess in my opinion is no better than the free advise given by a no-load investment company. Hindsight is definitely 20/20 but learning from a really bad experience is wisdom.

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