Retirement Planning
4 Stages of a Bear Market

All bull markets must come to an end. Many of the gains of the last few years were abruptly wiped out in just a month’s time. The argument could be made that bear markets are healthy and are sometimes referred to as a feature, not a bug. I’ve come to believe that there are four stages of a bear market, each with their own emotional issues and include at least two decision points that could arise on our journey through the downturn. I’ve illustrated these below.
The Bull Market
For years on end, we are moving right along with continual gains in our portfolios. These gains can go on for just a few years or a decade or more as they did throughout the 2010s.
But, at some point…
BAM!! A crisis occurs.
The crisis is like the antagonist of any gleeful story. It’s there to cause disruption in every way imaginable.
Stage 1: The Crisis

The onset of any bear market must include lots of big, bold, red font on TV with the words “SELL OFF” or “Markets in Turmoil.” This is to be expected. If you are nearing retirement, you’ve been in the game for a while and know this is what happens sometimes. You’ve seen all of this before, albeit for different reasons each time. Yet, despite knowing these events are coming, each crisis is met with a feeling of utter shock. It’s almost as if we have been lulled into thinking that the bull market could last forever.
Once the crisis is in full swing, we are met with our first Decision Point.
Decision Point #1 & Stage 2: Acceptance or Panic

The choice facing every investor at the onset of a full-blown crisis is pretty simple:
(1) Accept that enduring this type of event is part of successful investing.
OR
(2) Panic.
Make no mistake. This is a choice. I doubt if anyone is being forced against their will to choose either option. Assuming that’s not the case, at some point in the crisis, we are met with our first decision point.
Choose Acceptance:
Many investors who are nearing retirement become inured to choppy markets. It’s unpleasant but is an unavoidable part of the process. So, they accept that these events are part of the deal and ride them out. They have, in many cases, wisely adopted a portfolio strategy that allows them to deal with them without too much trouble. Those who haven’t…
Choose Panic:
Option two is outright panic. Get me out of the market so I can breathe again. I’ve seen enough and can’t handle it anymore. For reasons x, y, and z, I think the market is going to keep going lower and believe it’s smart to get out now. I’ll get back in when it’s safe again.
Panic always SOUNDS smart. We were born to believe that running from danger is the best course of action. The evolutionary process has not yet removed our proclivity to run from the first sight of danger. So, we’ll sell and wait it out until calmer markets and sanity return.
The problem is that sanity rarely returns until long after the bottom is in our rearview mirror, so it’s hard to convince ourselves when it’s time to get back into the market. The double-dip prediction (that never really materialized) from the Great Financial Crisis kept a large number of investors out of the market for a number of years – if they ever got back in at all.
At some point though, the crisis will soften and the recovery will begin.
Stage 3: The Recovery & Decision Point #2

We are all aware that, historically, every downturn we have ever experienced has been met with a recovery. Some recoveries have been swift and others have been slow to get moving. But recoveries have come 100% of the time. It’s inevitable. We know blue skies will return. How could they not? All of history and our entire lives have shown this to be true. It’s the timing of it all that is in question and can cause us to stumble.
For those who chose acceptance following the crisis, the recovery is where things start to feel more optimistic again. The worst of the crisis is behind us and we can move ahead. We begin to feel that the future is bright.
For those who chose to panic when the crisis occurred, there is a second decision still to be made as the markets have moved on without them.
Decision Point #2: Acceptance or Permanent Damage
With the stock market’s road to recovery well underway, those who panicked must now make a new decision. They can accept that they were wrong to panic (a really tough thing to admit) or stick to their guns and potentially cause permanent and irreparable damage to their long-term plan.
If acceptance is the decision, the investor must understand that the water may be cold once they jump back in. It’s possible that the minute they jump back into the stock market, the waters could be choppy. But this is why they must choose acceptance before recovery can begin for their retirement portfolio. If lessons have been learned and wisdom prevails, stay the course will be invaluable advice. If not, the cycle begins anew with permanent damage a likely outcome.
Stage 4: A New Bull Market

At some point, the markets will reach new highs again as all bull markets do. New market-highs shouldn’t be a cause for concern despite what the media tells us. In all likelihood, we’ll get to experience quite a few new highs since the market trades at all-time highs on about 7% of days.1 These new highs, of course, must all occur in the new bull market so they can come in bunches.
That is, at least, until we reach the final new high for that bull market. Unfortunately, the market doesn’t announce to us which one is the last one, but we know that eventually, there will be a new crisis with decisions to be made.
It may sound like a broken record as often as I say it, but having a plan for when this occurs is likely the only viable defense against poor decision making in the face of a crisis. Now is the time. There is no better time than now to build a plan if you are wondering what you should be doing during a time filled with so much uncertainty.
I’m curious though…
Where in the cycle do you believe we are in as we speak? Are we still in crisis mode or has the recovery begun? If not recovery, how long until you believe we make the shift? I have my opinions, but I would love to hear from you – email me your thoughts: [email protected]
Need Help Building a Plan?
If I can be of help to you in putting the pieces together for your retirement, please feel free to schedule a “Get To Know You” call.
I hope you and yours are safe and healthy!
*Credit to Alan Weiss for the inspiration of the visual.
1 From Ben Carlson’s Blog A Wealth of Common Sense: Don’t Be Afraid of All-Time Highs in the Stock Market
This post is not advice. Please see additional disclaimers.
The post 4 Stages of a Bear Market appeared first on Retirement Field Guide.
By: Ashby Daniels, CFP®
Title: 4 Stages of a Bear Market
Sourced From: retirementfieldguide.com/4-stages-of-a-bear-market/?utm_source=rss&utm_medium=rss&utm_campaign=4-stages-of-a-bear-market
Published Date: Mon, 06 Apr 2020 16:56:30 +0000
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Retirement Planning
Ends-of-the-World Every Year Since 1970

There always has been and always will be a reason not to invest or not to stay invested. This is all the mainstream media reports to us. Below you will find a list of some of the worst global events each year since 1970. I have some commentary to follow.
1970: War: US troops invade Cambodia.
1971: Civil Unrest: Anti-war militants march on Washington.
1972: Political: Start of Watergate Scandal.
1973: Economic: OPEC raises oil prices in response to US involvement abroad.
1974: Political: Nixon resigns as President of the United States.
1975: Political: Multiple assassination attempts on President Ford.
1976: World: Ebola virus.
1977: Political: Government shutdowns.
1978: Market: U.S. Dollar plunges to record low against many European currencies.
1979: World: Iranian militants seize the U.S. embassy in Teheran and hold hostages.
1980: Economic: Inflation spiked to a high of 14.76%.
1981: Political: President Reagan assassination attempt.
1982: Economic: Recession continues in the U.S. with nationwide unemployment of 10.8%.
1983: Economic: Unemployment in the U.S. reaches 12 million.
1984: Economic: 70 U.S. banks fail during the year.
1985: World: Multiple airplane hijackings around the world.
1986: World: Chernobyl Nuclear Power Station explodes.
1987: Market: DOW drops by 22.6% on October 22.
1988: Environment: Awareness of global warming and the greenhouse effect grows.
1989: Environment: Exxon Valdez dumps 11 million gallons of crude oil into Prince William Sound.
1990: World: Persian Gulf War starts.
1991: World: Mass shooting in Killeen, TX.
1992: Human Rights: Los Angeles riots following the death of Rodney King.
1993: Terrorism: World Trade Center bombing.
1994: World: Mass genocide in Rwanda.
1995: Terrorism: Oklahoma City bombing.
1996: Terrorism: Olympic Park bombing.
1997: World: Bird flu.
1998: World: Multiple U.S. embassy bombings.
1999: World: Columbine shooting.
2000: Economic: Start of the Dotcom Market Crash.
2001: Terrorism: Terrorist Attacks in NYC, DC & PA.
2002: Economic: Nasdaq bottomed after a 76.81% drop.
2003: World: The U.S. invades Iraq.
2004: World: The U.S. launches an attack on Falluja.
2005: World: Hurricane Katrina
2006: World: Bird flu.
2007: Economic: Start of the Great Recession.
2008: Economic: Great Recession continues.
2009: Economic: S&P bottomed after a 56.8% drop.
2010: Market: Flash crash.
2011: Market: Occupy Wall Street and S&P downgrades U.S. Debt.
2012: Political: Fiscal cliff.
2013: Political: Taper tantrum.
2014: World: Ebola virus.
2015: World: Multiple mass shootings.
2016: Political: Divided U.S. Presidential election.
2017: World: North Korea testing nuclear weapons.
2018: Economic: U.S. & China trade war.
2019: Economic: Student loan debt reaches an all-time high of $1.4 trillion.
2020: World: COVID-19.
While many of these events were undoubtedly terrible (and there are certainly others not named here that were worse), most of these were broadcast as end-of-the-world events for the stock market. Despite that attention, it is worth noting that these were, for the most part, one-time events. In other words, most faded into the newspapers of history. We moved on.
Obviously, some caused monumental shifts in the way the world works. Just think about how much air travel continues to be impacted by the events of 9/11. But, outside of the resulting inconveniences (if we want to call safety protocols inconveniences) associated with air travel, flying is safer than ever before.
Take a look at just about any of the events and you will find there are many that people will hardly remember. My point here isn’t that these events are to be ignored or that they were easy to stomach at the time, but that they have become a distant memory.
I want to also make the point that we should expect these types of negative events. As investors, we know these types of crises, economic catastrophes, and global phenomena are going to happen.
But in almost all cases, here is what we can say in the next breath – this too shall pass.
Will there be legal, humanitarian, economic, or some other aid required as a result of these events? Almost certainly the answer is yes, but that doesn’t mean it they won’t eventually fade into history.
Lastly, what’s worth noting is how the market has performed over these last 50 years despite the continual advertisements of the world crashing down around us. On January 2, 1970, the Dow Jones stood at 809 and the S&P at 90 -> those are not typos. These same indexes have grown (not including dividends) to 26,387 and 3,232 respectively. Amazing, no?
Perhaps what gets overlooked more than anything else is what separates the above one-time negative events from the positive stories that go largely ignored over our lifetimes. And that is a story worth telling. See the companion post below:
Unheralded Positive Events Every Year Since 1970
Stay the Course,
Ashby
Retirement Field Guide Mission:
“To help 10 million people make better retirement decisions.”
If you would like to join us in achieving our mission, I hope you will consider sharing our site if you have found it helpful in your own retirement planning.
This post is not advice. Please see additional disclaimers.
The post Ends-of-the-World Every Year Since 1970 appeared first on Retirement Field Guide.
—————–
By: Ashby Daniels, CFP®
Title: Ends-of-the-World Every Year Since 1970
Sourced From: retirementfieldguide.com/ends-of-the-world-every-year-since-1970/?utm_source=rss&utm_medium=rss&utm_campaign=ends-of-the-world-every-year-since-1970
Published Date: Tue, 04 Aug 2020 13:26:19 +0000
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Retirement Planning
Wildfire prone property insurance bill in California due for hearing

The post Wildfire prone property insurance bill in California due for hearing appeared first on Live Insurance News.
The bill is expected to be heard in upcoming weeks as opposing sites prepare for major battle.
A new California bill, the outcomes of which will have a lot to say about coverage for wildfire prone property in the state, will soon be headed for hearing. The hearing is expected to be a heated one as strong opposing opinions have the opportunity to be voiced.
Opponents of this bill are calling it a direct attack on consumer protections in insurance.
That said, proponents of the bill claim it is the best method for making coverage available to wildfire prone property in California. The bill in question is Assembly Bill 2167. It was written by Assemblyperson Tom Daly (D-Anaheim). If it passes,it will create the Insurance Market Action Plan (IMAP) program. The IMAP program is meant to protect residential properties.
So far, AB 2167 has progressed quickly, when taking into consideration that a chunk of the legislature has been considerably restricted by pandemic crisis precautions. It was first presented in early June and backers have been saying that it was brought forward in good timing and that it has all the momentum it needs to be passed.
That said, AB 2167 has not been without opposition. In fact, it has faced considerable opposition, having been called an attack on Proposition 103, insurance consumer protection law. California Insurance Commissioner Ricardo Lara lobbed that argument at it, calling it an “insurance industry wish list, with nothing to help consumers,” and Consumer Watchdog, whose founder, Harvey Rosenfeld, was the original author of Proposition 103.
The insurance industry strongly supports the bill, saying it will help wildfire prone property coverage.
Insurance organizations such as the American Property Casualty Insurance Association and the Personal Insurance Federation both support AB 2167. The bill also has the support of the California Association of Counties (CSAC), as well as Fire Safe Councils of California, and the CalFIRE union.
The Consumer Federation of America, another watchdog organization, has predicted that if AB 2167 passes, it will cause 40 percent increases in insurance rates. On the other hand, insurance groups claim that the bill offers owners of wildfire prone property a greater opportunity for choice and competition among insurance companies based on coverage and premiums while avoiding the limitations and high costs associated with FAIR Plan coverage.
The post Wildfire prone property insurance bill in California due for hearing appeared first on Live Insurance News.
—————–
By: Marc
Title: Wildfire prone property insurance bill in California due for hearing
Sourced From: www.liveinsurancenews.com/wildfire-prone-property-insurance-bill-in-california-due-for-hearing/8549884/
Published Date: Fri, 14 Aug 2020 09:00:14 +0000
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https://getinvestmentadvise.com/retirement-planning/is-this-the-last-hurrah-for-bonds/
Retirement Planning
Is this the last hurrah for bonds?

Recently, I have written quite a bit about the long-term return expectations for investing in bonds. See here, here, here and here.
Spoiler alert: I don’t think it’s good.
But long-term bonds this year have been quite an amazing story as the COVID pandemic has caused the Fed to take historically monumental actions. As a result, we’ve watched long-term Treasuries tear the roof off the market. For instance, a 20+ Year Treasury Bond ETF (name withheld for compliance purposes) is up more than 31% YTD as of July 31st.
That is insane!
But there is a good reason for this increase shown below.
The red circle shows a decrease in the 30-year Treasury rate of almost 40% over a span of six months. That’s practically unprecedented with only two periods (2008 and 1981-1982) having similar declines over such short periods.
But this begs the question: Is this the last hurrah for bonds as a driver of any meaningful return? Below is the 30-Year Treasury rate over the last 40+ years.

For what it’s worth, people have been forecasting the end of the bond bull market since 2012 (maybe even earlier) and yet it has continued despite those predictions. But at some point, the bond party will come to an end.
The Fed has been clear that they are going to keep rates stable until at least 2022 which means this may not change for a little while longer. Or in the near term, I could even see the high returns continuing if we experience pandemic economic shutdown round two.
But, I can’t see a world where this is the case for much longer than that – most importantly over the span of a 30-year retirement.
The official end of the bond bull market depends on a recovery from the pandemic economy as well as a few other factors causing rates to rise. But when they do, it seems likely to me that this may be the last great hurrah for bonds for quite some time.
The question is when to get off that train and that undoubtedly requires a personal answer.
Stay the Course,
Ashby
Retirement Field Guide Mission:
“To help 10 million people make better retirement decisions.”
If you would like to join us in achieving our mission, I hope you will consider sharing our site if you have found it helpful in your own retirement planning.
This post is not advice. Please see additional disclaimers.
The post Is this the last hurrah for bonds? appeared first on Retirement Field Guide.
—————–
By: Ashby Daniels, CFP®
Title: Is this the last hurrah for bonds?
Sourced From: retirementfieldguide.com/is-this-the-last-hurrah-for-bonds/?utm_source=rss&utm_medium=rss&utm_campaign=is-this-the-last-hurrah-for-bonds
Published Date: Wed, 12 Aug 2020 13:47:16 +0000
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