We are in the first Bear Market in 10 years. Historically this is the time when long-term investors should be putting money to work. We most likely will have more pain to come, as Bear Markets usually drop about 25-30% off of peak. With that said another 5-10% drop is likely coming.
Investors should not panic. By the word "investor," I mean someone with a time horizon of years not months. I for one will be putting money to work in 2019. I will calculate how much income I want to contribute to the market and make quarterly buys. Bear Markets should not be scary for long-term investors. We had a "Great Depression" and a "Great Recession" and the markets have always rebounded. Remember in 08-09 our whole Financial System almost collapsed. That is not happening right now. The fear is not a Financial System/Capitalist Form of Government collapse. The fear is a recession.
There are other fears including the Fed raising rates too fast and our debt level reaching unsustainable levels (our debt level reaching unsustainable levels has been a fear since the arguments of Alexander Hamilton and Thomas Jefferson). Interest on our debt compare to GDP and Government Spending, including spending on entitlements, are legitimate fears of course, but our way of life and form of government is not going to collapse.
Investors should not be putting money into the markets if they will need that money within a year or is part of their emergency fund. Only disposable income should be being put to work. If that is the case, investors should not worry about the market falling. Stress should easily be managed. Be smart with your money.
A few indicators I am going to be watching are the Russell bottoming (I tend to agree this is a leading indicator), the Schiller P/E ratio, and the forward S&P P/E Ratio. The Schiller and S&P P/E ratios should tell investors it's okay to start putting money to work and the Russell bottoming would confirm.
It is not worth it to panic. If you are panicking then either you have too much money in stocks, your time horizon is too short (you are more a trader than investor), or stock investing is not right for you (put money into bonds for guaranteed returns).
Good luck everyone! 2019 is going to be a volatile year for the markets. Pick winners and watch company's debt levels and cash flow from operations. A healthy balance sheet will survive a down turn in the economy.
Submitted December 24, 2018 at 01:53PM by mshenocker http://bit.ly/2BC87vz
