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How to Be a ‘Genius’ in a Bear Market

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Well, here we are. This week the S&P 500 finally slid into a sustained bear market. The index closed Monday 20% below its peak, down to its lowest level since January 2021. Treasury yields surged and the dollar rose on fears about global trading. And Bitcoin? Oh boy. The cryptocurrency entered what strategists called its “deepest and darkest” phase, with prices hovering around lows they haven’t hit since 2020.

How long will it last? Some are looking to history as a guide. Over the past two decades, there have been four S&P 500 bear markets. Both in the early 2000s and financial crisis bears, it took more than 1,000 trading days to recover losses. The head of equity strategy at Saxo Bank, Peter Garnry, compares the current selloff with the dotcom bust of 2000 and the 1973-74 bear market.

Current circumstances are weighing on everybody’s finances. Sky-high inflation is hurting the economically vulnerable the most. At the other end, the world’s 500 wealthiest people have so far this year lost a combined $1.4 trillion, according to the Bloomberg Billionaires Index. On Monday alone, they lost $206 billion. Crypto billionaire fortunes are vanishing as quickly as they were made, and employees at some of the sector’s hottest startups are now being laid off by the thousands. It’s left the US Federal Reserve in a tricky spot as it tries to tame record costs without harming Main Street too much. Yesterday it raised rates 75 basis points. (Here’s a good analysis of the Fed’s move.)

What can you do about all this? If you read one piece this week, I’d highly recommend this one from my colleague Suzanne Woolley. One thing Suzanne said that stuck out to me most: We feel losses more intensely than we perceive gains, so give yourself a break if you’ve been steadily investing over the past few years. The S&P 500 has still returned (with dividends) almost 70% over the past five years. If you feel the need to make moves in this market, she quotes an investment manager with a great suggestion: Don’t make all-or-nothing decisions.

“If you’re ever in doubt, or if your brain is saying, ‘What if I just keep holding this stock for a few more days?,’
if you want to be a genius, sell half of your position,” said David Wright, co-founder of Sierra Investment Management. “You’re a genius if the market recovers, because you haven’t sold it all, and if it continues down, you’re a genius because you protected half of your holding from going down that far.”

I asked a few financial advisers for one thing they’re telling clients this week. Here’s what they said:

  • “You can’t see the return show without buying a risk ticket,” said Mark Struthers, a financial planner at Sona Wealth. “Risk is the price of admission.”

  • Laura Mattia, chief executive of Atlas Fiduciary, says she’d remind clients that only part of their portfolio is invested in the domestic market. What’s more, “their overall plan was built to achieve both short-term and long-term goals. For clients who require an income stream, we have implemented a cash withdrawal strategy overlay which will not disrupt the overarching investment strategy or their spending needs.”

  • And Wealthfront’s Tony Molina says it’s crucial to stay invested right now, citing the 2020 market drop. “The market had a maximum drawdown of 34.3% that year, which is large even by historical standards. But investors who stuck it out all year were rewarded with a total return of 24.1% by the time the year was over.”

Don’t Miss

  • Fired Coinbase employees didn't see it coming.

  • Conor Sen: Everyone wants to work for big, boring companies again.

  • A crypto hedge fund’s vague tweet is fueling speculation over losses.

  • The last 12 houses on Florida’s Fisher Island are up for sale.

  • Bond-market losses are just beginning.

  • US recession calls are spreading on Wall Street.

  • Larry Ellison bought a Hawaiian island. But people already lived there.

  • The inevitable crypto lawsuits must answer one big question ( WSJ Opinion)

  • Another list of most-expensive cities — this time, for the rich.

  • One country is set to see 4,000 millionaires move in this year, a new study shows.

  • Americans are building vacation-home empires with easy-money loans.

  • Did you buy shares in Robinhood’s IPO? The stock has since fallen 80%.


In Bloomberg Opinion this week, Teresa Ghilarducci says hiring older workers could be a wise way to fill the jobs gap:

To solve the labor shortage, all eyes are turning to the more than 1.3 million older workers who were pushed out or voluntarily left the labor force during the pandemic. But don’t hold your breath waiting for all of them to come back now. Sure, some older workers are returning, but they’re outliers. Displaced older workers face huge challenges returning to the labor force and won’t return en masse until the federal government takes significant steps to end age discrimination and assist with health-care costs. Read her full argument here.

You Ask, We Answer

I want to join a gym. I keep reading reviews from not just one gym but several around here about the painful process of trying to cancel and being double-billed some months. Is there anything I can do to protect myself? (I.e. paying with a prepaid card, paying with my credit card for protection, paying manually... etc.?) — Dan Rimada, 32, New York City

Assuming you’re not locked into an annual contract, all the protective measures you suggested are good ideas. Gym membership contracts might be a little confusing once you get beyond the trial promotions. Once the trial memberships end, it can be a heavy lift sorting through the legalese of their contracts. Here are three suggestions to protect yourself.

First, look for a gym that’s upfront and transparent about its terms and fees, and they simplify the process to join.

Second, the discipline required to go to the gym also applies to reviewing the bank or credit card account you use for deducting your monthly fees. Although rare, you might be surprised to know that not just gyms, banks, and credit card companies sometimes make mistakes.

Finally, go regularly. The more disciplined you are in going to the gym, the more disciplined you will be in managing your money, not just your gym membership. — Frank Paré, president, PF Wealth Management Group


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