The Next Bear Market

I can’t tell you when the next bear market will happen, but I can tell you for sure that we will have one.

And we might even have one sooner rather than later.

Going back to 1956, the average length of bull markets in Canada is 49 months, and the average gain during those bull markets is 126%. Well, this latest bull market has lasted 72 months, with a gain of 123%.

In the U.S. a person might be even more concerned that we are due for a break. The average U.S. bull market goes for 50 months. We are currently at 72 months and counting. The average gain is 155%. We are sitting up 225% since the 2009 market bottom.

So I think it’s fair to say that these bull markets might be getting a little long in the tooth, both in terms of duration and in magnitude.

Here’s what I am doing about it:

Absolutely nothing, and here is why.

First, despite all the best guesses about the markets might do in the near future, they remain just that: guesses. Anyone who pulled out of the markets 2 years ago thinking that we had exceeded the average time span for bull markets has just missed out on 2 years of good growth.

But perhaps more importantly, for long term investors having a periodic short term setback might be surprisingly benign for long term results.

If you were to look at a growth investment one year down the road you could see some unpredictable results. You may see some glorious one year returns, but you might also see some really disappointing one year returns. But for the long-term investor, regardless of whether a person started their journey with a huge head start or a seemingly huge handicap, the 30 year returns will hardly vary at all.

Will we see a bear market again? Of course. It’s inevitable.

But you are the one that gets to decide what you are going to do about it. Adopt a rational, disciplined mindset and profit from owning quality investments for the long term. Or make emotional knee-jerk reactions and see unpredictable (and most likely pretty bad) results.

By Brad Brain, CFP, R.F.P., CLU, CH.F.C., FCSI

This article was posted in Smart Money Blog.
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