When fielding client phone calls regarding their concern about the recent pullback in the equity markets, we begin with a review of how well the market has done over the past couple of years and note that certainly a period of consolidation, whatever the catalyst, is healthy as it helps build the proverbial “wall of worry” upon which bull markets are built.
HOWEVER, we certainly understand why many of the callers are not satisfied with a recap of where the market has been as that is akin to providing yesterday’s weather. They are justifiably concerned about where we believe the market is headed. Although not our base case, the intent of this Chart Talk is meant to address the fear of many that perhaps this correction will progress into a bear market.
Before looking at the chart below, keep in mind that of the 27 market corrections since 1974, only six have become bear markets. That said, as the chart indicates, if history is any guide, the average length of a bull market (63 months) is nearly three times as long as the average bear (14 months) and returns nearly five times (182%) of what has been lost (-36%).
Data from 12/12/1961 to 2/19/2025, which is the current peak of the latest bull market. The market is represented by daily price returns of the S&P 500 index. Bear markets are defined as periods with cumulative declines of at least 20% from the previous peak close. Its duration is measured as the number of days from the previous peak close to the lowest close reached after it has fallen at least 20% and includes weekends and holidays. Periods between bear markets are designated as bull markets. Indexes are unmanaged, do not incur management fees, costs and expenses and cannot be invested in directly. Past performance is no guarantee of future results.
We also know that no matter where the bottom is to this pullback, in order to achieve long-term success as an investor it is important to check your “emotions at the door” as that enables one to focus on their long-term objectives which in turn allows for better decision making.
It is futile to attempt to predict the short-term direction of the financial markets. However, we believe in time that through information gathering and subsequent research, our clients are well positioned to weather any further pullback and yet are well positioned to benefit from a subsequent recovery.
Should you have any questions or wish to review your portfolio, we welcome your call.
“This presentation is not an offer or solicitation to buy or sell securities. The information contained in this presentation has been compiled from third party sources and is believed to be reliable, but its accuracy is not guaranteed and should not be relied upon in any way, whatsoever. Fagan portfolio characteristics and holdings are subject to change at any time and are based on a representative portfolio. Holdings and portfolio characteristics of individual client portfolios may differ, sometimes significantly, from those shown. This information does not constitute, and should not be construed as, investment advice or recommendations with respect to the securities listed.
Additional information including management fees and expenses is provided on our Form ADV Part 2. The actual return and value of an account fluctuate and, at any time, the account may be worth more or less than the amount invested. Bond Investments are affected by interest rate changes and the credit-worthiness of the issues held in the portfolio. A rise in interest rates will cause a decrease in the value of fixed income positions. Past performance results are not indicative of future results.”
