Is the Bear Market Over?

This bear market has been difficult for retirees and you may be asking yourself “is it over yet?”

We discuss both sides of the argument so you’re a better-informed investor, including, three action items at the end of the video that you can apply today to have confidence in your plan.

Is the Bear Market Over?

Resources:

Full transcript:

SPEAKERS

Alex Okugawa & Anthony Saffer

Alex Okugawa 0:00
This bear market has been difficult for retirees. And so you might be asking yourself, Is it over yet? Today we’re going to talk about the different sides of opinion on this topic. And we’re going to talk about three action items that you can take today so that you can be more confident in your retirement plan. Stay tuned. Hey, there, it’s Alex and Anthony, from One Degree Advisors, and we help you gain confidence in your retirement. So Anthony, let’s take a look at this chart here. I mean, the market has recovered a bit from its lows back in October of 2022. And so some people might be arguing, you know, it seems like the bear market might be over we’ve had some reprieve, but the truth is that the yield curve is still massively inverted. In other words, an inverted yield curve means that short-term debt is paying out a higher yield than let’s say, longer-term debt. And under normal economic circumstances, that simply isn’t the case. And the thing about an inverted yield curve is that when the yield curve inverts, it’s predicted a recession 100% of the time since 1955. And again, the question here is, isn’t an investor’s famous last words, “Isn’t this time different?” So is this time really different when we’re looking ahead?

Anthony Saffer 1:16
Yeah, and you wrote a great blog post on inverted yield curves and we’ll go ahead and post that so you can learn more about it. I think the counterargument when we say, well, maybe the stock market is recovering, and maybe it is going to hold is that interest rates have come up so much so fast, that if things really did turn negative, now, the Federal Reserve has some dry powder, so to speak, to bring interest rates back down. And that could be the tailwind that stocks need at that point in time. You know, there is that saying, don’t fight the Fed. And certainly, stocks have had that headwind as interest rates have come back up. But if things got bad, the Federal Reserve could bring interest rates back down again.

Alex Okugawa 1:59
Now, the thing, though, is that the Fed has made it explicitly clear, Powell has made it explicitly clear that they want to get back to a 2% inflation target. And so we’re still not anywhere near that target. Yes, inflation has come down a bit. But we’re still not close to that. They don’t want to relive the mistakes of the 70s. And so Powell is going to make sure they do everything in their power, at least that’s what he’s communicating to make sure that they get to that 2% target. Now, the other thing is that the market has never bottomed before a recession. And the NBER, which is the National Bureau of Economic Research hasn’t technically announced a recession yet. And so if that’s truly the case, if we’re technically not in a recession, yet, there’s an argument that could be made that maybe we’re going to retest those October 2022 lows again.

Anthony Saffer 2:55
Yeah, that’s right. I mean, if you go back to recessions, I mean, the be investment markets, the stock market does anticipate, right, it tends to start recovering at the beginning or somewhat in the middle of a recession. And if we’re not even in a recession yet, that is the big argument is that well, maybe the stock market has to come back down since we’re not there yet. I think the counterpoint to that, though, is that this is the most anticipated recession? It’s that slow-moving train that’s coming towards us. Has the stock market just simply said, well, let’s get the downturn out of the way, and therefore move towards that upward trend right now.

Alex Okugawa 3:32
Yeah, the other thing too, is that I mean, we live in such a connected world right now. I mean, think back to previous economic recessions and previous market declines. You know, we didn’t have social media like we do today, we didn’t have the speed and breadth of communication we do nowadays. So you know, there’s an argument that could be made because things have changed. And because people are more aware of these indicators and things like that, it is very possible that this time is different, because everyone is aware of it. Whereas before, not a lot of people were you know, you got your New York Times in the mail, what maybe, you know, every now and then, and then you got caught up nowadays, people are doing scrolling Twitter every you know, 30 seconds, looking for the latest tidbit, and it keeps people on top of it.

Anthony Saffer 4:18
Yeah, things do move fast in this day and age, what doesn’t tend to move fast is inflation and especially as it’s coming back down. And so what we’re seeing is that inflation may not be where we want it. Maybe we’re still paying too much in the grocery stores. But there is disinflation taking place. And it does tend to really lag the rise in interest rates. And economists know that the Federal Reserve knows that is there is going to be a lag in prices slowing down after interest rates. In other words, it’s headed in the right direction. And if we can get that big thing out of the way, inflation, is that the precipice that stocks need to continue the recovery.

Alex Okugawa 4:59
Yeah, and it certainly could. Now when you look at US small business sentiment, it’s been declining at a rapid pace. In fact, it’s even lower than it was during COVID 2020. And in some ways that can be a bad news because US Small businesses are the lifeblood of the US economy. And so if what you’re saying is, look, US Small businesses are quite pessimistic, that means they might not incur as many capital expenditures, they might not spend as much they might not grow as much that can lead to a contracting economy overall, that’s just not good. So in some ways, these indicators like business sentiment, can be a leading indicator of what is to come.

Anthony Saffer 5:42
Yeah, and one more quick thing before we get into the solutions is that there has been a lot that’s going around that says, What when the Fed gets ready to pause on interest rates, stocks go up from there, and that’s not necessarily true. Liz Ann Sonders put out a piece from Schwab. And we’ll go ahead and post that, that the results are actually pretty mixed. Alright, so let’s dig into some action items, some key takeaways that you can apply so that you have confidence in your investment plan going forward with the uncertainty that’s presented. Number one would be trading the news for well-researched investment material, you have to remember that the news doesn’t have your best interests at heart, they want viewership. Whereas news wants clicks. And they want to keep you watching. And so the news tends to get more extreme, we see it be very partisanship, a lot of arguing that’s going on, if you really want to get caught up, look at the stuff that is deep research that’s principle-based, and shameless plug but our investment philosophy, not that our philosophy is the only way to do it. But the point being is that it digs further into good academic research, we’ll go ahead and post the link to that be a good place to start.

Alex Okugawa 6:53
The second thing I’ll make pretty quick here is just control what you can control, right, you can control your spending. In some ways, you might be able to control some of your taxes. That’s why we’re such big advocates of tax planning, but controlling what you can control the things you can’t control, necessarily the market, you know, focus on the things you can control that puts you in the driver’s seat and less of a victim. You know, you don’t want a victim mindset in any of this.

Anthony Saffer 7:17
Yeah, all that other stuff gonna happen either way, you can’t control the direction of the market. Alright, number three is investing according to your timeline. So you might be asking, well, if I can get 5% on a CD at the bank, why not just keep my money in cash? And forget about stocks and the volatility that come with that? Why do we need bonds at all? We actually think you should have all of them. We posted a video recently that talks about retirement investing, where’s the best place to put your money when it comes to retirement and it actually talks about both cash bonds and stocks and really aligning your investment plan with your timeframe.

Alex Okugawa 7:53
Once again, this is Alex Ogawa with One Degree Advisors. And if you found today’s video helpful, please like and subscribe for more it helps the channel grow so we can reach more retirees just like you retire with confidence. We recently posted a guide called Five Retirement Mistakes to Avoid and we found that these are mistakes that most retirees make and they are critical to avoid so that you can have a long successful retirement you can download that guide for free in the link below.

Transcribed by https://otter.ai

The One Degree Blog

Not signed up yet? Get weekly financial insights right to your inbox.
Subscribers also gain access to our private monthly client memo.

We will keep your email safe. You can unsubscribe at any time.

This does not constitute an investment recommendation. Investing involves risk. Past performance is no guarantee of future results. Consult your financial advisor for what is appropriate for you. Disclosures: https://onedegreeadvisors.com/solutions/#disclosures

Free video lesson!

Video Lesson: How Much Can I Spend In Retirement?

We don’t spam! You can unsubscribe at any time.