Bear markets come in two shapes :
1-Intense in nature, short in duration
2-Gentle in nature, long in duration
The first type are like the pandemic of 2020. This can be nerve wrecking, the dip is intense and one shot, with little or no upward corrections (no Zags). Another example is the Black Monday of 1987, quick, intense, nerve wrecking, like a sudden knock out that takes you down. The storm is over before you know it. A few month later the market picks up, compensates the dip by a long and stable bull market. Usually investors end the year with a good profit.
The second type are like the 2008 prime bear market and the 2000 bear market accelerated by 911 and rising rates.
This is the type of bear market that starts with the impression of a great buying opportunity, a correction, especially when that first leg down (the first Zig) is followed by a decent upward correction (the first Zag). We are talking about 1-3 weeks of green. However, once a new round of selling starts, it takes the price to lower lows and a long slow process of mental torture, confusion and chaos is followed. The world at the peak of a Bull market is not the same at the bottom of a long term Bear market. The old school describes it as a shift from Disbelief (that the markets will ever dip, that big corporations will ever go bankrupt, that the economy will ever slow down, or that i fail in paying my debts) to a state of slow Belief that, "maybe i was wrong". This phase is then followed by Disbelief again (that prices will ever go up, or that stocks are good investment)....this is when end days books are sold most.
So what do we make of this? I think that Money Management, Asset Allocation and Stock picking is now of utmost importance. Get your financial life together and pay whatever need to be paid, or at least have a future payment plan, so you will not be forced to take any non realized loss. If all we saw is a 15% dip in the S&P500 since January (thats 4 months) then how long will it take for another 25% down? (another 5-6 months?)
If this is a bear market, We expect it to be like a marathon, a long distance swim, till we make it to shore safely with minimum damage, and maybe with a few extra bucks in our pocket.
Bullish Sectors:
So what sectors to watch? Defensive and sectors that benefit from Inflation:
These are currently all Bullish: Basic Material, Oil and Gas, Staples, Real Estate, Utility, Health.
Bullish Stocks:
Oil and Energy: EQNR, SSL, CVX, COP, and Chinese PTR, SNP
Basic Material: MT (Accelor Mittal) ZTO, CTVA and FCX
Health and Staples: COST, PFE, HD and UNH.
OTHERS: CHINALONG, QCOM, AMX,
Even if i am right about the Big Bear, there will be upward Zags, and it will look good for a few weeks, till the sellers come back to push prices South, or till we see some light at the end of the tunnel.
Amro