What does a cyclical bear market look like?
In the last 100 years, if you remove the 3 biggest bear markets (1938, 1946 and 2000) which were crises, the average bear market has only lasted 50 weeks with an average drawdown of 31%. We are 22 weeks into this cyclical bear market with a peak to (intraday) trough of around -20%. The causes for bear markets are almost always unique, but the outcome is always the same (except for duration.) That is why expected future returns go up as the market goes down.
Famous last words of investing are ‘this time it’s different.’
2022 has been a very tough year in the markets, there has been almost nowhere to hide, even the bond market is down ~10%, term deposits are losing 6-8% to inflation. Canada’s resource rich TSX market has been somewhat insulated here and has been a reminder for the value of global diversification.
The Real Length of the Average Bull MarketSource: https://asymmetryobservations.com/2013/09/ 16/the‐real‐length‐of‐the‐average‐bull‐market/
What should investors be doing?
In March we sent out a letter asking clients to please let us know if there were near-term needs for cash (the market was down a bit already, but still positive in the 12-month period at that time and only down year-to-date 1/3rd of what it is now) so we were really glad to have touched base with those people who had upcoming expenses and hopefully they have all been brought to our attention and planned for.
Naturally, we cannot help clients plan for something we don’t know is upcoming. Other than that, you just need to stay the course until the market comes around; and it will.
Regarding young investors or people starting out, you really need to try to increase your systematic payments into your investments at times like this… The dollars you put into the market this year will be some of your best purchases you will ever have the opportunity to make in your life.
Artist: John PritchettSource: https://www.pritchettcartoons.com/bears.htm
We know seeing market fluctuations can be stressful, especially in tandem with cost of living going up and so much uncertainty in the world. It’s at times like these I can better empathize with dentists and doctors who have the unfortunate task of frequently delivering bad news to patients. The good news here is, this ailment will come to an end naturally and without having to cut sugar from your diet. The difficult part is that we can’t know when it will end exactly, we can only look at the numbers, estimate and plan.
We issued this investor letter a month early in part to inform you that Hans will taking 1 week off June 13th to June 20th. During that weekend, June 18th-19th, Investia are doing their final FundEX-Investia systems amalgamation and they have requested that we avoid processing unncecessary transactions in that preceding week, so as to avoid technical issues. This coincides with the Canadian Formula 1 Grand Prix in Montreal, which Hans will be attending with his partner, Brianne. Brianne, bought Hans the Formula 1 tickets for Christmas.
As many of you know, Hans has been a big Formula 1 fan since ~2014 and will be Cheering on Checo and Max for the Redbull racing team! He will still be accessible at this time for emergency issues or anything that can’t wait until the following week.
There are known knowns… There are known unknowns… but there are also unknown unkowns... If one looks throughout history… It is the last category that tends to be difficult
DISCLAIMER: This newsletter contains general information only and is intended for informational and educational purposes provided to the clients of Anne Marie Dryden & Hans Bischoff. While information contained in this newsletter is believed to be reliable and accurate at the time of printing, Anne Marie Dryden & Hans Bischoff do not guarantee, represent or warrant that the information contained in this newsletter is accurate, complete, reliable, verified or error-free. This newsletter should not be taken or relied upon as providing legal, accounting or tax advice. You should obtain your own personal and independent professional advice, from your lawyer and/or accountant, to take into account your particular circumstances. Commissions, trailing commissions, management fees and expenses all may be associated with ETF & mutual fund investments. The indicated rates of return are the historical annual compounded total returns including changes in unit value and reinvestment of all distributions and do not take into account sales, redemption, distribution or optional charges or income taxes payable by any security holder that would have reduced returns. ETF’s & Mutual funds are not guaranteed, their values change frequently and past performance may not be repeated. Please read the prospectus before investing. The views expressed in this message are not necessarily the views of Investia Financial. Exchange traded funds, mutual funds and exempt market products are offered through Investia Financial Services Inc.