Here’s a fun headline: “The Dow just booked its worst first half since 1962.”
That’s 60 years! And lest you think I’m cherry-picking, this was also the worst start in 50 years for the broader S&P 500 and the worst first half in history for the Nasdaq Composite.
But I don’t think we need to run for the hills just yet.
One of the reasons this bear market feels so nasty is that it kicked off 2022. We never got to benefit from broader gains this year because the market stumbled right out of the gate.
But in terms of its size, this is your garden-variety bear market. The S&P 500 is just below the 20% threshold that officials use to define the worst downturns.
That’s nice and all, but when will this nightmare be over?
How Long Will This Bear Market Last?
The “average” bear market can last anywhere from nine to 16 months, depending on what index and time frame you use.
Some are much shorter than that. We saw that in 2020 when the COVID bear market was over before it started.
But some drag on for what seems like forever. Inflation and geopolitical tensions — similar to what we face today — drove the bear market in 1973. After 21 months, the S&P 500 was 48% lower.
None of this is a precursor for today’s bear market. For all we know, a brand-new bull market could start this month.
But given the history here — and the fact that this is the first time young and middle-aged investors have experienced a real bear market — I think it’s important to prepare for the possibility that this gets worse before it gets better.
What Do We Do About It?
I’ve never seen my friend Adam O’Dell sweat. If I hadn’t met his family, I might have assumed he was a robot. No matter how dicey the market gets, Adam never loses his cool.
And here’s why.
Adam is an active trader. He doesn’t just buy and hold and hope for the best. Like any good quantitative trader, he has rules and he sticks to them.
So when a trade goes the wrong way for him, it’s not devastating. He rolls with the punches because he’s an expert at managing risk.
Take a play out of my buddy Adam’s playbook:
- Go through each position in your portfolio.
- Determine your exit strategy.
- Write it down.
- And stick to it.
I recently mentioned position sizing as a critical risk-management technique — and I’d reiterate that again today. Make sure your position sizes are consistent with your risk tolerance.
I’d also recommend you start putting aside some cash. Don’t go crazy and liquidate your entire portfolio or mortgage your house. But avoid major purchases for a while if you can. Drive your old car and sit on that old couch a little longer.
Because this bear market has already created incredible opportunities. And the worse this gets, the more lucrative these chances become. You’ll want cash on hand to take advantage when the moment arrives.
And Adam has you covered.
His brand-new elite research and stock-picking service is designed to find stocks with the potential to hit 1,000% gains or more in only one year.
And this bear market is the key.
To safe profits,
Charles Sizemore, Co-Editor, Green Zone Fortunes
Charles Sizemore is the co-editor of Green Zone Fortunes and specializes in income and retirement topics. He is also a frequent guest on CNBC, Bloomberg and Fox Business.