August 23, 2022

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TOGETHER WITH

Good Tuesday to you. Can you guess what's the average length of a bear market (going back to 1928)? a. 96 days, b. 9.6 months, c. 19.6 months. Follow the wave 🌊 below for the answer.

Our topics for today:👇🏽

Relief rallies in a bear market
Hoarding cash at the wrong times
Worth bundling your insurance?

MARKET OUTLOOK

Relief Rallies In a Bear Market

It was a brutal six and a half months in the markets to start 2022—the S&P 500 was on pace to log its 7th worst year ever at its low point.

Since mid-July though, the winds seemed to shift. The S&P 500 was up about 12% since mid-June, and the Nasdaq bounced up even higher at 15% after recording its best July ever—only to crash back down over the last couple trading days.

Given these recent sharp and positive bounces in the market, we can’t help but ask: Are these temporary green spurts just relief rallies, or is it a sign that we'll soon be entering greener pastures?

The bullish outlook—optimism

Inflation drops: The US just clocked its second official CPI reduction of the year, and it was 3x more than the 0.2% drop in April. When markets are up, they are hopeful inflation has peaked.
Good news for stocks: Elsewhere, we know valuations are down across the board, and both companies and indexes have shaved off some fat gained over the last two years. Earnings from Q2 were also less dismal than expected as 77% of the S&P beat EPS estimates.
The recession: The average duration of a recession going back since WW2 has been just 10 months. If we’re truly in one based on the technical definition of two consecutive quarters of negative GDP, that would put this recession having begun in January, meaning that, historically speaking, we’re almost out of it.

The bearish outlook—pessimism

Inflation’s still bad: While it’s nice to see inflation finally drop a bit, we could also definitively state that it’s still historically high. That means it has the potential to remain unresolved if the slightest thing goes awry in the global economy again. The threat of this alone could give us yet another spike and bring the bears back out.
The recession: Although it is possible that if we’re in a recession, we may be almost done with it, it’s also possible that it hasn’t even begun. Why? Well, since 1950, each time inflation has exceeded 4% while unemployment dipped below 5%, we’ve seen a recession sometime within the next two years.

We won’t know til’ we know

While it’s still nice to have a general idea of what to expect, the reality is, that nobody knows. The foolproof outlook is to invest for decades no matter what happens and adjust your short-game fun money strategies according to what happens.

Be diligent in the long game and fluid in the short, some combination of Taoist and stoic with the markets.

SAVING & INVESTING

Hoarding Cash At The Wrong Times

This year, a lot of people have been saving more money in fear of the red we’ve seen in the markets and the general uncertainty that abounds.

Recent surveys show that just 1 in 4 people think now is a good time to invest, and a whole 65% say they’re keeping more cash out of the markets than they should.

It’s often the case that our base instincts are the exact opposite of what’s most beneficial, and it can be very easy to get led astray by those natural inclinations. And the stock market is a prime example of this.

Investors tend to flee when tickers are red and come back when they’re green—the exact opposite of a profitable strategy. It’s herd mentality at its finest, and a natural reaction that can be overcome.

Fix it with intentionality

Save for the right reasons: If you’re someone who’s keeping money out of the markets because you’ve been dedicating it to building up an emergency fund or some short-term concrete expense, that’s a good reason to be hoarding cash. On the contrary, if you’ve already established those baselines for yourself and you’re still holding out, that could be costly.
Invest for the decades, not days: Many of us are scared off from investing during tumultuous markets like this one, mostly due to just how bad and uncertain it looks. But, what’s important to remember is that you’re not investing in this market, you’re investing for 5, 10, 20, even 30 or more years from now, and it’s compounding that will help drive those returns higher the longer you invest consistently.
Don’t miss out on a good sale, right? When we find an item on sale, we see it as saving money, but when we see stocks on sale, we see it as a potential for loss. Fear of loss has been found to outweigh the potential of gain in the mind, and this makes a lot of sense as to why we’re so fearful of down markets. Nevertheless, the reality is that millions are made in recoveries, and buying in when everyone is fearful is more likely to benefit us in the long run.

Take this related lesson on this topic and earn Dibs 🟡 while you're at it:

Time In The Market Beats Timing The Market

Investing Basics

1 mins

MONEY TIP

Worth Bundling Your Insurance?

Love it or hate it, insurance is kind of a necessary evil of modern life, and it can be a true wallet saver when it’s needed. Insurance companies know this, and they want as much of your business as possible, which is why most will offer discounts if you elect to “bundle” or combine multiple policies with them.

It can seem like a great idea on the surface, but there also might be just enough cons to balance out the pros depending on your situation.

The ups and downs of bundling

Upside—convenience: This one speaks for itself. It can be a true pain to have to wrangle multiple insurance policies across multiple companies for all your assets, and having them all conveniently held and managed in the same place can be a real stress reducer.
Upside—actual savings: If you’re lucky enough to be able to get the coverage you need and save money by bundling with one provider, that’s a win-win situation, and in this case bundling makes sense.
Downside—policy cost: Sure, bundling policies might save you money, but what if that individual policy is noticeably cheaper on its own from a competitor? This is a real risk, which is why it’s important to compare policies first.
Downside—quality: The details of your insurance policy matter, they’re quite literally the life of the coverage. If you’re bundling to save money but the bundled policy in question is sub-par, those savings could easily come back to bite you in the event the coverage is needed.

Take this related lesson on this topic and earn Dibs 🟡 while you're at it:

Insurance Basics

Insurance

6 mins

🔥 TODAY'S MOVERS & SHAKERS

Zoom (-15%) beat on earnings but fell short of the street's revenue expectations; the video conferencing company cut it's full-year forecast.
Palo Alto Networks (+11%) shares are up as the US cybersecurity company reported better than expected quarterly earnings, issued positive full-year guidance and announced a 3-for-1 stock split.
Bitcoin (+0.45%) to $21,493.50(1D)
Ethereum (+0.8%) to $1,637.85 (1D)

This commentary is as of 8:30 am PDT.

🌊 BY THE WAY

🗓️ Answer: 9.6 months. The average length of a bear market in the S&P 500 Index since 1928 is 289 days, or about 9.6 months. That’s significantly shorter than the average length of a bull market, which is 991 days or 2.7 years (Hartford Funds)
💻 Apple will let you repair certain MacBooks yourself beginning today (CNBC)

🐻 ICYMI. Some bear market survival tips (Finny)
🐔 Burger King is going big on fake chicken (Takeout)
🎓 Biden admin is ‘talking daily’ about student loan forgiveness, expects decision in ‘next week or so’ (CNBC)
🏙️ Finny lesson of the day. If you're a renter, ever wonder why and when you might need renters insurance? If so, take this lesson that unpacks the jargon:

What's Renters Insurance?

Housing

6 mins

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