Investors wonder about the current bear market and want to know if we are “out of the woods” or if there is “more pain to come”. The graphic below shows that the stronger the rally, the higher the probability that the bear market will end. After a 17.4% rally from the June S&P 500 lows, there is a low probability (3.6%) that the current rally will fail. However, if it does fail, the historical average decline from these levels to the ultimate bear market low would be 31% and take seven months.
It’s that time again where everyone is offering their views on the upcoming year, with market commentary and outlooks. Last year’s results, data and opinion are assembled into a narrative along with forecasts and implied recommendations. Investors seeking to reduce uncertainty and anxiety are easily attracted to such prognostications.
There has been an overwhelming growth in the number of investment choices over the last 20 years, as asset managers compete for investment dollars. As a result, many investors are easily overwhelmed by the sheer volume of investments and confused about what investments they should have. The chart below highlights this explosion in today’s marketplace.
Armed conflicts are highly charged events that by their very nature generate legitimate and strong emotional responses. While there are many questions and implications around armed conflicts, as long-term investors, an important question is what we should do from an investment perspective? For guidance, we look at how the US stock market has reacted to 16 armed conflicts since the end of World War II.
With the sharp market rebound, investors may find sizeable gains and tax consequences in their portfolios. Few things generate a more emotional response than taxes. Deciding to hold or sell an investment based purely on the tax consequences is usually at odds with maintaining a disciplined investment process. Ultimately, marginal differences in tax treatments are not as significant as we might imagine.
The daily stream of events and the accompanying wave of pundit opinion can take its toll on weary investors and leave them in a state of angst about the markets and their investments. Planning is a powerful tool to help investors to refocus on their long-term goals and stay on track. The chart below highlights the benefits of planning taken from a study on retirement planning among Americans over age 50 in a wide range of market conditions.