September was another positive month for investors. US large-caps and small-caps led the way, while international stocks and bonds also increased. This year, international stocks are the clear leader, followed by US large-caps. US small-caps and bonds have also done well.
Bull and Bear Markets
It’s been a stellar year for investors. Despite some significant volatility last spring, almost all asset classes have made money this year. While this is good news and cause for celebration, it can also bring uncertainty about the future. Questions we’ve been receiving lately include:
- “How long can markets continue going up?”
- “Is now really a good time to invest cash when prices are so much higher?”
The following chart from JP Morgan can give some context regarding the answers to these questions:
The chart shows seven bear markets (defined as a 20% decline from the prior peak) since 1970, along with the subsequent bull markets (measured from the final bear market bottom) that followed. The following points are worth considering:
- Bear markets tend to be shorter than subsequent rebounds. The average bear market has lasted 14 months, and the longest lasted 30 months. Meanwhile, 6 out of 7 bull markets lasted longer than 30 months. This is where we get the Wall Street adage, “Stocks take the stairs up and the elevator down.”
- Bear markets can also be severe, with an average loss of -38%. While they present significant challenges for investors, those who can stomach the volatility are usually rewarded in the long run. The average bull market return is 221%! As more time passes, stocks can just keep going up, but there are limits to how far they can ever fall.
- The current bull market is roughly 36 months old. Based on history, this implies that it could continue for many more months (maybe years!) before another bear market comes around.
Investing during both bull and bear markets can be tricky, but risk is always part of the equation. That’s why we are constantly monitoring and evaluating the positioning of your investments. If you have any questions or concerns regarding the current market, or if you want to develop a plan to invest cash, please reach out.
