End of the Bull Run, but... Optimism & Diversification

Well, here we are, 3 weeks into this latest market meltdown.  It was the longest ever Bull Run, and today we have heard official notice that the beautiful run has now officially turned Bear.  The decade beginning in 2010 was very prosperous for many economies and financial markets, and I think most people knew a correction was imminent, one way or another.  But let’s have a look at some of the bright sides, and remain with an understanding that there are opportunities for growth and that this one too shall pass.

I own these very cool Bull & Bear figurines, which I bought at a silent auction fundraiser a few years ago. They live in my office on display for clients and co-workers to see (and comment on!).

 The announcement of the end of the USA Bull Market today – that is, when an index such as the S&P 500 shows a decline of more than 20% for a sustained period – comes amid sharply declining oil prices and the rapid spread of the COVID-19 virus.  Arguably some of this current correction is also a result of the “washing out of the euphoria that ruled within the markets for months” (Brent Joyce, GLC Insights, March 10th, 2020) leading up to February 2020.  I think this correction is perhaps the most well-understood in terms of what triggered it in the first place. And yet, as of mid-March 2020, we are witnessing high levels of fear amongst millions of people around the world.  I just spent a moment scrolling through Twitter, and these are particularly anxious days on that social media channel (NBA and NHL suspending the season, Trump's shaky speech from the Oval Office, Tom Hanks with the virus, etc, etc). 

Here’s some good news about Bear Markets, relative to Bull Markets: they generally don’t go far down (percentage wise), and they are usually over quickly (duration doesn’t persist long).  One chart that I like to refer to is a visual timeline of the Bull & Bear Markets over the years.  In the image below (S&P/TSX returns – Bulls outrun bears since 1949), you can visually see that both (1) the percentage of growth and (2) the duration (length of time of Bull Markets compared to that of Bear Markets) rise in favour of the Bull.

Despite daily news stories that seem increasingly shocking, I believe in remaining stoic and optimistic.  I have built my financial advisory practice on ensuring my clients are resilient and have solid risk management plans, including in their investment portfolios.  Having implemented good downside planning, our clients are educated and protected in this current market.  Diversification within both our investment portfolios and in our overall net-worth is our best friend at times like this. 

I believe in owning various ‘pots’ of assets, including real estate, a balance between fixed income and equity investments with proactive re-balancing mechanisms (read: unemotionally), and also ownership of permanent tax-advantaged whole life insurance.  If you'd like to have this conversation (either in person or from a distance), I would be honoured to have it with you.