Prepare for the Bear: Retirement Investing
After the worst ever performance on Christmas Eve last year, the markets staged a “post-Christmas rally” as the DOW added over 1,080 points (4.9%) its biggest one day point gain ever. The S&P 500 also rose 4.9% on that day. That unlikely rebound offered a much-needed reprieve from an otherwise abysmal month. Shares had fallen four consecutive days prior, pushing the S&P 500 just a few points from a bear market which is defined as a 20% retreat from its high water mark. Will the markets melt back down in 2019 and enter into (20%) bear market territory? Or will they rebound this year and avoid the bear? While nobody knows for sure, if they do rebound it’s a temporary avoidance, because a bear market is coming at some point, we just can’t know precisely when.
Since WWII, there have been 15 bear markets:
Please note that the average bear market takes the S&P down almost 30% and the duration ranges from about 6 weeks to about two and a half years.
The Common Occurrence Of Government Shutdowns: Fiscal Policy
Government shutdowns have been a common occurrence over the years under most every president. The length of the shutdowns has varied from 2 days in 1981 under President Reagan to 21 days in 1996 under President Clinton. A shutdown occurs when Congress fails to pass or the President refuses to sign legislation funding federal government operations and agencies.
Government shutdowns entail partial closure of certain agencies and departments, not complete closures. Departments affected during the most recent shut down include Homeland Security, Housing & Urban Development, Commerce, FCC, Coast Guard, FEMA, Interior, Transportation, and the Executive Office of the President.
Federal employees deemed as “essential” among the various departments are required to work without pay until a funding bill is passed by Congress. The closures affect numerous private businesses that rely and adhere to regulatory rules imposed by the Federal government, such as mortgage loans and Housing & Urban Development.
We don’t know when the next bear market is coming or how long and deep it will be. We also can’t know when government shutdowns are coming and how long they will last. What we do know is that bear markets always recover and government shutdowns are never predictive of short term market movements. So as long as your comprehensive plan has accounted for these normal events they should have no impact on our long term strategy.