A Secular Bear Market May Be Upon Us: Here's What You Should Do

Is a secular bear market on our horizon? 

Goldman Sachs Chief  Global Equity Strategist Peter Oppenheimer publicly stated on November 21st that, “The bear market isn’t over.” 

He continued warning that a sustained recovery won’t begin until interest rates peak- which isn’t expected until late 2023.   

At NJM Wealth Preservation Strategies, we want you to know there are ways to prepare while keeping your portfolio safe. Let’s talk about market trends and what you can do to protect your retirement regardless of the volatility of the market. 

Secular Market Trends

Secular refers to market activity that unfolds over long time horizons, or that aren’t influenced by short-term factors. A secular trend likely continues moving in the same general direction for the foreseeable future. A secular market is the market’s overarching trend or direction for a long period of time. 

Secular bear markets consist of long-term price declines punctuated by occasional market rallies. Rather than a straight move from the upper left to the lower right on a chart, a secular bear market creates a sawtooth pattern, with sharp moves upward and downard, which ultimately ends at lower price levels. 

Are We in a Secular Bear Market? 

The stock market has seen many ups and downs this year. Buffeted by war, inflation and change in monetary policies, the S&P Index was down more than 20% from its peak, causing stocks to fall this summer. Despite its recent rally in November, the S&P 500 is still down 16% year to date. 

The present market anxiety isn’t irrational, given persistent inflation, rising interest rates and geopolitical tensions. Any or all of these factors could combine to intensify market turmoil, both in the short or long term. It’s likely we will continue to experience market volatility for the foreseeable future, but that doesn’t automatically indicate a bear market. However, it’s extremely important to stay aware and keep up with market trends to protect your portfolio. 

Just because the market is down, does not mean you can’t make money. Oftentimes, this environment leaves opportunities for profit when you use the right investment tools. If a bear market is upon us, follow these tips to stay afloat:

Understand The Risk Associated With Each Asset Class You Hold

The first thing you need to do is understand the cause & effect of these holdings on your portfolio. This should be a top priority no matter the status of the market. Understanding the risks will require you to factor in a variety of things such as your age, time horizon, cash requirements and whether you’re interested in having your money managed for results as opposed to having your emotions managed. 

Diversify Your Holdings

One of the most effective ways to lower risk and protect against major losses is portfolio diversification. This involves investing in a mix of different asset types across different industries. During a bear market, all companies in a given stock index generally fall, but not necessarily by similar amounts. If you’re invested in a mix of winners and losers, it helps minimize your portfolio's overall losses. 

Because bear markets typically precede or coincide with economic recessions, investors tend to favor assets that deliver a steadier return, irrespective of what’s happening in the economy. This strategy might mean adding assets such as dividend-paying stocks or bonds to your portfolio. 

Invest in Sectors That Perform Well in Recessions 

There can still be investments that do well in bear markets. Think about things consumers need no matter what. Those are the sectors that generally perform well in down markets. No matter the condition of the economy people still need gas, groceries and healthcare. Consumer staples and utilities can usually weather bear markets well compared to others. 

Index funds or exchange-traded funds allow you to invest in specific sectors and track market benchmarks. Index funds and EFT also offer more diversification than investing in a single stock because each fund holds shares in many companies. 

Focus on the Long Term

While these periods can be difficult to endure, history shows the market always recovers. If you’re investing for a long-term goal the bear markets are historically overshadowed by bull markets. If you need money in the short-term or less than five years, it should not be invested in the stock market.

How NJM Wealth Preservation Strategies Can Help

Market volatility can be frightening, especially when your retirement savings are on the line. One of the best things you can do to protect yourself is by working with a knowledgeable, experienced and trusted financial advisor. At NJM Wealth Preservation Strategies, we specialize in crafting a retirement plan that meets all of your individual needs and protects your funds against the ups and downs of the market. We work directly with you to create an action plan that ensures you’re getting the most out of your savings. 

Retirement planning requires some forward thinking, and it’s never too early or too late to get started. To reclaim control of your portfolio & see what truly active management can do for your retirement, schedule a call with us today.