The S&P500 had a value of 4,796 on January 3, 2022, which marks the highest value achieved by this index. It took until June 13, or 161 days, for the bears to overtake the bulls and pull the market down over the -20% mark (or a value of 3,837). The reason for the decline on Monday, June 13 was in result of a higher-than-expected inflation report in the US, which may require the US to raise interest rates more aggressively than expected.

Think of the US Fed like a high-wire tightrope walker; they must balance their actions accordingly or else they will fall and the US economy will find itself in a recession. If they do not move interest rates higher, quick enough then inflation will continue its upwards trajectory, which means higher prices for products and services, and will require that the Fed is more aggressive with future interest rate hikes, which will put added strain on asset prices and the credit market. If they move interest rates too high and too fast for the current state of the US economy then the higher rates will backfire and the US will find itself in a recession.

If I can provide any advice during this time, it is to avoid listening to mainstream media and focus on the things that you can control during this period of time.

Play Dead (avoid costly knee-jerk reactions)

Use Emergency Cash for Income Needs (if you are reliant on income from your portfolio)

Keep Investing (this is an opportunity if you are still savings for the future)

Revisit your Goals and Risk Tolerance with your Wealth Professional

Use the Volatility to Rebalance your Portfolio

STAY CALM

This isn’t anything new and we can look back at history to find that the average decline in a bear market is negative 30% and the average duration is around 13 months. As of now, the 2022 bear market has a current return of negative 22% and has a duration of around 5.5 months. This particular bear market may already be on the path to recovery or we may experience further declines from here but, remember, the values on your screen/statement are only your values if you make the (short-sighted) decision to sell.

Want to chat about it? Email me at info@financerx.ca.