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Market Cycles: Bull vs Bear

• Posted by Dejan Pekic BCom DipFP CFP GAICD, Senior Financial Planner

A bear market is defined as a crash in asset prices from recent peak of 20% or more.

Technically then the Australian All Ordinaries index is still currently in a bull market since COVID-19 which was back in March 2020.

Click All Ordinaries.

However, the United States S&P 500 index has only been in a bull market since the Russian invasion of Ukraine which was in February 2022.

Click S&P500.

The numbers tell a simple story, you cannot avoid bear markets if you are investment in growth assets such as listed businesses. The reason for investing in growth assets is to beat inflation.

The other extremely important message is that bull markets are always bigger and last longer than bear markets.

If you then put add these bull and bear markets together over multiple decades you can see that the benefits of long term compounding outweigh the irregularly occurring asset price crashes.

Click 30 year index performance.

In the words of Benjamin Graham…’the essence of investment management is the management of risks, not the management of returns’… which is why remaining invested according to your appetite for volatility is key and when panic does take hold during a bear market, react by buying more quality assets at discounted prices.

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At Newealth we are always looking to support and promote our clients wherever possible and if you have any ideas or comments, please feel free to email me or to call me on +61 2 9267 2322.