bear market

Unprecedented Times

By | 2020, Newsletter | No Comments

It is unprecedented times like these that bring people together with a common focus and a shared desire. Protecting the lives of our family, friends, and community has become top of mind, and our daily efforts reflect that devotion.

While times have changed, our commitment has not waivered. Your financial success and well-being are our top priorities. We are diligently working to stay abreast of the changing financial landscape and keep you on track to meet your financial goals.

When creating financial plans, we are continually watching for bumps in the road that could prevent our clients from reaching their goals. Financial markets and the associated volatility are not unexpected. In fact, market volatility, as a risk, is built into every plan we create, whether you are working toward future retirement or enjoying retirement now.

Having had the opportunity to help clients through multiple bear markets, and numerous market corrections, we know that sticking with your plan delivers the best opportunity to achieve financial success.

We will continue to use email and social media to stay connected and keep you informed. We will resume sending postal mailings when COVID-19 restrictions have been lifted.

I invite you to contact one of our wealth managers to discuss your situation, get answers to your questions, and hear what Smedley Financial is doing to help protect your financial future. We are working remotely and are still available.

I want to thank those who have reached out to us, concerned about our well-being. Your thoughtfulness is very much appreciated.

It is our greatest hope that you and your loved ones stay healthy and safe.

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Surviving A Bear Attack

By | 2015, Money Moxie | No Comments

bear claw

We have all heard that when a bear attacks, the best thing to do is to stand still! Sounds simple enough, right? Well, it isn’t that easy. A few years ago I had the privilege of hearing Michael Dunn’s story on surviving a grizzly bear attack in the Grand Teton National Park.

Dunn was on a family vacation in the Tetons on August 14, 1994. He woke up before the rest of the family and quietly slipped out the door for a run. He saw signs of danger, but kept moving forward. He had made it just a couple miles on the dirt trail when he heard some branches snap. Suddenly, a large shape moved towards him, knocking him off his feet. He landed nine feet from the trail, where a 500-pound grizzly sunk its teeth into Dunn’s hip.

There was little chance for Dunn as he struggled. The bear clawed at his back, swiped at his neck, tore open his face, and almost stuck a claw right into Dunn’s eye.

The end seemed near and Dunn decided to play dead, which calmed the bear enough that it was distracted. Dunn’s survival was nothing short of miraculous!

Bear markets
Bear markets are not life threatening but can be financially devastating, especially if we make poor decisions. A bear market is typically defined as a loss of 20 percent or more. Smaller losses are often referred to as corrections because they are less damaging and could even be viewed as healthy market behavior. (After all, if stock values just went straight up then how could they represent value from real ownership of real companies?)

This summer, the S&P 500 officially hit correction territory with a 12 percent drop. These drops can be alarming, but often the best thing to do is to stand still. I have compiled more advice for these difficult times.

Last 50 years

Don’t panic
These corrections are normal and are to be expected. Remember 2008 and 2009? The financial markets melted down in a frightening manner, but then recovered to new highs. The current market is nowhere even remotely close to as bad as that was.

Trying to time the market by getting out at a high point and getting back in at lower prices is almost impossible. Most investors would be better off staying the course. Historically, the U.S. stock market has recovered from every correction and every bear market to eventually reach new highs.

Keep perspective
Stock prices experience dips frequently. In fact, only 53 percent of days are positive. Positive months are only slightly more common at 59 percent.

Even though 10 percent corrections occur on average once every three years, the three-year return has been positive 78 percent of the time and the three year average has been a 24 percent increase.

Fortunately, bear markets are rare—occurring, on average, about once every six years. In fact, based upon history, an investor willing to diversify and weather the storms is four times more likely to make 20 percent than to lose 20 percent.

Total Returns

The real positive difference comes over longer periods as the positive numbers begin to compound. For example, over the last 50 years 74 percent of the calendar years have been positive for the stock market.

Over the same 50 years, the chance of losing 20 percent in a calendar year has been extremely rare—occurring just once every 17 years. (Bear attacks resulting in death have occurred once every 18 years on average in Yellowstone.)

Don’t fixate on your statement or the news. If checking your statement every day is going to make you feel like something needs to be done then try checking less often. It is important to stay in tune with what is happening in the world around us, but again, if the news makes you feel like you have to do something then beware. Good news is harder to find in the media, especially regarding financial headlines.

Look for opportunities
A market correction is a good reminder that risk is real. If you or someone you know has any doubt that their investments match their financial plan or their ability to accept financial risk, then come see an SFS Wealth Consultant.

When the market drops, some people get nervous and want to get out. Others welcome the fall as an opportunity to take advantage of better prices.

Remember diversification
“Don’t put all of your eggs in one basket” is a classic phrase to describe diversification. Overall, history has shown this to be one of the most prudent ways to invest.

We don’t know if the current correction will grow to become a bear market. No one knows. However, we do have over 100 years of combined experience at SFS and we feel confident that the market will come back. Stay the course and your long-term results will not only help you survive, but you may even thrive.


*Research by SFS. Data from public sources. The S&P 500 is often used to represent the U.S. stock market. Calculations are based upon a 50-year history in this index. One cannot invest directly in an index. Investing involves risk, including potential loss of principal. Diversification does not guarantee positive results. Past performance does not guarantee future results. The opinions and forecasts expressed are those of the author and may not actually come to pass. This information is subject to change at any time, based on market and other conditions, and should not be construed as a recommendation of any specific security or investment plan.

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3 Reasons to Run with the Bulls

By | 2014, Money Moxie, Viewpoint | No Comments

Our current bull market is more than five years old. Since hitting a new high on March 28, 2013, the S&P 500 has continued to reach 67 more records—averaging almost one each week. Is this market too strong to continue or is it too powerful to end now?

Herbert Stein famously said, “If something cannot go on forever, it will stop.” This undisputable fact is profound in its application to life and investing. In other words, planning for growth over a lifetime is reasonable, but a new high every week is an unrealistic expectation.

On March 28, 2013, the S&P 500 stock index reached a new, record breaking high. I wrote about this event in the following Money Moxie article, “Patience is a Rewarding Virtue.” My conclusion then as it is now was to continue to hold on. Making money is what stock ownership is all about. I also pointed out that “The average return following a new high is positive for 1, 2, 3, 6, and even 12 months following the high.” Fortunately for investors that forecast was correct. In the 12 months following that new high the S&P 500 made over 18 percent.

Bulls and Bear

Don’t Fear a Correction
This is an unusually strong time to be investing in U.S. stocks and it will not last forever. The S&P 500 averages one 10 percent correction each year and a few 5 percent drops. This is all it takes to spook some investors, causing them to miss out on the growth that follows.

While short-term events can be shocking, long-term returns are predictable. Investing in a diversified portfolio for long periods of time, such as 10 or 20 years, almost always yields positive results. Whatever happens, hang in there. Once we accept the fact that corrections are a normal part of stock investing we will begin to see them as opportunities to invest.

Indicators Look Good
Bear markets are typically defined as a drop of 20 percent or greater. These large drops are extremely difficult to predict. (Those who do are like broken clocks-correct only twice a day.) However, bear markets have some common threads.

1. The yield curve is the difference between long-term and short-term interest rates. It has turned negative around nearly every bear market in the last 50 years, but it is extremely positive right now.

2. Energy prices matter more than any other price in the world. Oil use has an impact almost ten times greater on the economy than any other commodity. So it is no surprise that oil prices have spiked around the end of bull markets in the last 40 years. (1987 was the only exception!) Right now, oil prices look relatively stable and thanks to growing domestic production there is reason to think it will continue.

3. Consumer spending represents 70 percent of the U.S. economy. On average, Americans are spending nearly everything they make, so we cannot expect much more from them. Improvement will come as the number of unemployed workers drops and as employers raise wages. While watching for increases has been like watching paint dry, it is happening. Momentum is positive in the jobs front.

New market highs come for a reason. The economy is continuing to improve. The most important indicators are pointing in the positive direction. The greatest warning sign in stocks is that returns have perhaps been too good. That alone is only enough fuel for a small correction, not a major bear market. When one of these corrections comes we should try to see it as an opportunity. This is an incredible time to be an investor.

*Research by SFS. Data is from the Federal Reserve Bank of St. Louis. Investing involves risk, including potential loss of principal. The S&P 500 index is often considered to represent the U.S. market. One cannot invest directly in an index. Past performance does not guarantee future results. The opinions and forecasts expressed are those of the author and may not actually come to pass. This information is subject to change at any time, based on market and other conditions, and should not be construed as a recommendation of any specific security or investment plan.

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