Page 23 - BusinessWest July 11, 2022
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  Navigating Uncertain
Financial Markets
It’s a Time to
Stay Focused and Think Strategically
IBy Barbara Trombley, CPA
f you have a retirement account, as many of us do, it is hard not to follow what is going on in the financial markets today. We are officially in a bear market, defined by a drop of 20% or more in a broad market index.
The Dow Jones Industrial Average crossed into bear market territory on June 13 of this year. Unfortunately, bear markets may plummet even deeper than the 20% threshold and may do so over a prolonged period. It is
a tough time to be an investor during this scenario but, eventually, the market finds a bottom and investors feel comfortable once again to begin buying, putting an end to the bear market.
Bear markets are usually the result of a recession or some other financial strain. We are not officially in a reces- sion, but many experts think that one is coming. A reces-
sion is defined as a significant decline in economic activ- ity that lasts for months or years. This often means that unemployment rises as companies fail or shrink to control costs. Corporate profits fall causing a decline in stock mar- ket prices.
Usually, a bear market signifies tougher economic times ahead. Unfortunately, bear markets are ‘normal’ and happen periodically. We actually experienced a short bear market at the beginning of the pandemic. Bear markets tend to be much shorter than bull markets (when stocks rise over a period of time). They also tend to be less statis- tically severe, with average losses of 33% compared with bull market average gains of 159%, according to data com- piled by Invesco.
What should an investor do during a bear market? Risk tolerance, asset allocation and your age really come in to play right now. The percentage of equities in your portfolio should match your risk tolerance and age. For instance, if
Wealth Management
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