After the stock market free fall of 2020, day traders were making a killing, and everyone from regular
Joes to Wall Street insiders were getting in on the action. Cryptocurrency was also red hot, with Bitcoin
skyrocketing from an all-time high of over $23,000 in December 2020 to over $64,000 by the first half of
Fast forward to 2022 and the landscape has changed. We are now in a bear market, and people are
feeling the pinch. Day trading is no longer as lucrative as it once was, and many people have lost money
in the stock market. Cryptocurrency has also taken a hit, with Bitcoin falling below $18,000.
So, what does this mean for investors? Well, it’s important to remember that bear markets don’t last
forever. Sooner or later, the stock market will rebound, and people will start making money again. In the
meantime, we must be patient and be smart about our investments.
By taking the right steps, you can maintain your financial vitality, even in a bear market. In this blog, I’ll
go over five ways to keep you up and running through a downward trend in the stock market.
First thing first, what’s a bear market?
A bear market is considered to be a sustained decline in stock prices that lasts for two months or longer.
Technically, it’s a drop of 20% or more from recent highs – usually measured by an index such as the
Dow Jones Industrial Average or the S&P 500, but applicable also to individual securities or
Bear markets can be caused by a variety of factors, including economic recession, high-interest rates,
financial scandal, or even geopolitical turmoil. But, whatever the cause, bear markets can have a major
impact on the economy and on individual investors. In severe cases, they can lead to widespread panic
and a loss of confidence in the financial markets.
It’s not surprising that many people come to me asking what they should do, and the key is to
understand what causes bear markets and how they can be managed.
The Economic Outlook for 2022-2023
Just a few months ago, it seemed like everyone was making money day trading. No matter what they
were investing in – stocks, crypto, real estate, or even just simple commodities – people were raking in
the profits. They thought they were great at it, and they enjoyed the thrill of the market highs and lows.
However, all of that has changed in the last few months. The bear market has taken a toll on nearly
everyone’s portfolios, and many people are wondering what to do next. A lot of their funds have
diminished and with inflation at 40-year highs, there’s no good place to hide, like cash or bonds.
For now, it may seem like the best thing to do is to sit tight and wait for the market to stabilize. But this
doesn’t mean that you should give up on investing altogether, it means you should take a step back,
reassess your situation, and change your approach.
I know bear markets can be scary, and that fear is often fueled by negative headlines and media
coverage. With all the negativity out there, it’s easy to get caught up in the fear and start selling off your investments. However, emotions can be a powerful force in the stock market, and it’s important to
remember that they can work against you as well as for you.
In a bear market, emotions can lead you to make decisions that are based on fear rather than logic, and
that can have a significant negative impact on your investment portfolio. If you’re feeling overwhelmed
by the negativity of a bear market, it may be helpful to talk to a financial advisor who can help you stay
focused on your long-term goals and make decisions that are in your best interests.
We must also consider that, at the same time, we’re in the middle of another economic trend: the Great
Resignation. Many people are choosing to change jobs or even careers in an effort to ride out the storm
or simply to bring about a change in their lives that they had been delaying. Whichever the case, let’s
keep in mind that while this can be a stressful time, it also offers an opportunity to reassess your
financial situation and make sure you’re on track to meet your long-term goals.
You may be thinking, “We get it, we’re in a full-fledged bear market. What can we do?”
At the time of writing this blog, growth stocks had plummeted by 25-30%, or MORE. Emerging markets
haven’t fared much better, losing 17% of their value. Bonds, a typical safe haven when stocks are under
pressure, had been hit the hard as well, having the worst year since 1842! This is clearly a bear market,
and there is nowhere to hide.
It also means that there is no one asset class that is safe from the current market conditions. However,
there is still some hope for investors. Like any business and market cycle, this correction is normal,
leaving time for investors to still make money in the markets. However, it is important to be cautious
and to diversify your portfolio so that you are prepared for whatever the future may bring.
This takes us to my straightforward yet important tips. The current environment is very conducive to
making a lot of bad decisions – these 5 steps will help you do the opposite as we weather this storm.
1 – Don’t hit the panic button
Do you sell it all? No. Curb your emotions.
When the stock market starts to tank, it can be tempting to sell everything and get out while you still
can. However, this panicked response is often driven by emotions rather than logic, and it can end up
costing you dearly in the long run. If you’re patient and disciplined, it’s often possible to weather a bear
market and come out ahead on the other side.
The problem with selling when the market is dropping is you must get two decisions correct: when to
sell and when to buy back in. It’s the buying back in that is so difficult. By not perfectly timing the
bottom of a market cycle you risk missing out on big rebounds as many of the largest market gains
happen at the beginning of recoveries.
By staying invested and riding out the downturn, you’ll be well-positioned to take advantage of the
eventual rebound. Of course, there’s no guarantee that the market will always recover; but if you sell
during a bear market, you’re guaranteed to lose money in the short term. So, if you’re feeling anxious
about your portfolio, resist the urge to sell everything. There are better ways to move and spin what
may look negative in your favor.
2 – Look for opportunities
If you have cash on the sidelines, this is a great opportunity. Look for macroeconomic trends and
identify industries that are likely to prosper during a recession. For example, during the last recession,
there was an increase in demand for products that helped people save money, such as generic brands
and home-cooked meals. As a result, those that were able to capitalize on these trends were able to
achieve strong financial performance despite the overall economic conditions.
As I write this, there are some terrific companies that are 30-40% off their 52-week highs. These
companies have strong balance sheets, great business models, and are likely going to rebound. Think of
your favorite bike on sale for 40% of the sticker price. Does the bike perform any less? No. It’s the same bike, but at a fraction of the cost. It’s the same scenario when it comes to investing.
You could also consider certain sub-industries, like liquor, considering that people regularly
buy liquor during recessionary environments. These are some ideas I’m talking to with my clients during
today’s economic and market challenges.
Now, many people believe that the best way to invest is to put all their money into the market at once.
However, this strategy can be risky, especially if the market is volatile. A better approach is to invest
periodically, such as once a month or once a quarter. This technique is called dollar-cost averaging, and
it can help to reduce the risk of timing the market right. When you invest periodically, you are
essentially buying more shares when the price is low and fewer shares when the price is high.
Over time, this can help to average out your cost per share and improve your overall returns.
Furthermore, periodic investing can also help to discipline your investment strategy and keep you from
Selling during a market downturn. So, if you have been investing regularly, don’t stop now – keep going
and you will be glad you did.
3 – Turn off the TV
When it comes to the stock market, there is a lot of noise. And, unfortunately, a lot of that noise can be
negative. From doomsday scenario headlines to 24-7 news cycles that seem fixated on the latest drop, it
can be easy to get caught up in the fear and start to feel like you’re losing money. But here’s the thing:
the market is volatile. That’s just part of it.
While it’s important to stay informed, it’s also important to remember that volatility is normal. So, if
you’re feeling overwhelmed by the market fluctuations, try to take a step back and get out of the
mindset that you must constantly check your investment portfolio. Instead of watching the news and
getting caught up in fear, focus on your long-term goals. After all, you’re investing for the future, not
4 – Examine your diversification
Stay flexible and be willing to change your approach as the market changes. There are ways to shift the
portfolio right now that will help you set yourself up for success. In a bear market, for example, value
stocks are usually a better bet than growth stocks. And in periods of high-interest rates, short-duration
bonds will usually outperform long-term bonds.
By being willing to shift your focus, you can help ensure that you’re always invested in the right asset
classes for the current market conditions. This can help you to minimize losses and position yourself for
success when the market eventually recovers. Of course, there is no guaranteed formula for success, but
by being proactive and adaptable, you can give yourself a better chance of weathering any storm.
5 – Don’t try to catch the falling knife
While bear markets can present opportunities for savvy investors to buy low and sell high, they can also
be a time of great uncertainty, so it’s important to be cautious with your investments. This is not the
time to take unnecessary risks and make reckless investment decisions. If you do want to try something
new, start small and focus on investing in companies that are resilient to economic downturns or in
proven investment strategies. Moreover, be prepared for fluctuations – and even to lose some money.
Remember, your mindset plays a huge role in your success in investing.
Consider the three layers of your SELF to help you drive awareness, and ultimately, a higher chance at
Basic Self – Our foundational self that runs (almost) automatically. It maintains necessary
functions and is our emotional center. Think of it like the four or five-year-old child inside of you,
it tries to assert its desires and wishes upon the conscious self.
Conscious self – The very deliberative part of yourself. If you see and hear everywhere that the
market is in a terrible situation, that is what you will start living by. This Self is AFFECTED and
INFLUENCED by the inputs and energy it is surrounded by.
Higher self – This is where you are conscious of all levels of yourself. It’s your ability to view your
actions and decisions as third-party onlooker. It’s a new level of awareness where you aren’t
affected by what’s going on in the world and you do things that further your long-term goals.
My point? Mindful wealth only comes when you are aware of your surroundings and act off rational
thinking rather than emotional thinking. It’s the ability to be present in the moment and focus on what
you’re doing without letting your mind wander.
For investors, mindfulness is key to making rational decisions and avoiding emotional mistakes. When
the stock market is in a downturn, it can be tempting to make rash decisions in an attempt to recoup
losses. However, this is often when investors unknowingly make their biggest mistakes. By staying calm
and focused, you can avoid making emotionally driven decisions that you may later regret. Mindful
investors are more likely to weather bear markets with minimal losses. It is also helpful to have a trusted
advisor to help you manage these emotions and provide clarity during chaotic times.
The market is still changing, and it is as important to be informed as it is to remain calm. We must be
adaptable and start by understanding the changes that are occurring in the market landscape. Only then
we will make more informed decisions about investments and position ourselves for success in the
As the economy becomes more and more uncertain, I invite you to check out the Four Points Wealth
Economic Report for 2022-2023 for more insights on what is happening with the United States economy
and how you can continue to grow your financial foundation even through tough times.
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