wellspoken

From the Desk of SagePoint Financial

By Mike Mayer

The Chinese symbol for crisis is actually the combination of two symbols: opportunity and danger. If we are in fact in the early stages of a new bear market, it certainly will be dangerous for buy and hold investors but a great opportunity for practicing active allocation.

Over the past 40 years, the US has gone through six recessions according to the National Bureau of Economic Research. And every recession has been accompanied or preceded by a bear market.

The average fall in the S&P 500 has been -34.8% and an even harder fall for the NASDAQ of -46.5%. Besides the price damage, the bear market ate up a lot of valuable investment time, again on an average of 548 days, or 1 and a half years. And without a defensive strategy, it takes some very good gains to make up for the losses. For example, a +53% gain to recover from a -34% loss in the S&P 500, and a +87% gain for a full recovery in the NASDAQ losses.

But are we in a recession? It may not make a difference. First, we will not get the official news until after the fact. And very possibly, the economy will continue to struggle along at a stalling speed. Second, over the past 40 years the S&P 500 and the NASDAQ have gone through a total of ten bear markets (four without a recession). We do not need a recession for a bear market to take place.

The vast majority of investors have never heard of active management or active allocation and its benefits. The average investor is looking at a 401k statement that for the past decade or longer has probably failed to keep pace with inflation; in many cases the actual performance is dipping into the negative column.

The S&P 500 was trading at the same level it first hit in July of 1998! Granted that is without dividends, but even adding the dividends in, the returns have failed to even keep up with inflation.

If we are at just the beginning of a bear market that has much further to go on the downside, and may last through the Presidential election, investors confidence will be severely eroded. They will be looking for a solution, and that is active management, active allocation.

For further information regarding Active Allocation, Contact Art Ortman or Mike Mayer at SagePoint Financial (208) 888-0936.

SagePoint Financial, Inc., is not affiliated with Capital Educators Federal Credit Union. Securities are not insured by NCUA, are not obligations of or guaranteed by Capital Educators Federal Credit Union and are subject to investment risks including possible loss of principal investment.

Securities and investment advisory services offered through SagePoint Financial Inc., A registered Broker Dealer, Registered Investment Advisor and member FINRA/SIPC.

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