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How to Survive a Bear Attack- 03.20 Thumbnail

How to Survive a Bear Attack- 03.20

Michael D'Angelo- March 2020

These are truly unprecedented times. As we grapple with COVID-19, the bull market which began in March of 2009 has transitioned into a bear market as of March 2020.

Just to reiterate- bull markets indicate upwards trends in markets and bear markets indicate downward trends in the market. 

As markets have recently fallen sharply, it’s time for all investors to go back to the drawing board and review the fundamentals of investing. In essence- it is time to learn How to Survive a Bear Attack. Here, I present to you four guiding principles that can help you manage your way through these times:

  1. Vanquish Fear and Panic    

  2. Know Your Environment

  3. Take Advantage of Opportunities

  4. Don’t be Afraid of Noise

Vanquish Fear and Panic

If there’s one thing that we know about panic is that panic can drive you to become fearful and when you become fearful you are easily induced to make bad decisions. During this unique period of time where we are all dealing with a serious health crisis, investors must be wise to avoid the urge to make irrational decisions. “The peak to bottom in the Bear Market of 2008/2009, the market was down 57 percent,” says Phillip Petursson, Chief Investment Strategist, Manulife Investments. “Investors locked in their losses somewhere within that 57 percent drop, and didn’t join the market again until 2012 when the market hit the prior high from March 2007- those investors were never going to regain those losses.”

Time and time again, emotions get the better of investors- fear of missing out will prompt buying at the high point of the market, and fear of losses will prompt a selling spree when markets dip.

By staying focused on the bigger picture, investors can maintain the right position to weather the storm.

Know Your Environment

The economic environment guides decision making. Trying to predict market outcomes of an evolving situation (COVID-19) remains challenging however- what we do know is that the situation will eventually be brought under control. 

Petursson says with all financial indicators looking strong- the only thing missing was factoring in the risk for a black swan event (unexpected/ unkowable event) such as COVID-19. “Now that it’s here, the work begins to figure out implications and economic impact of business shutdowns.” 

What do we do now? It’s time to take advantage. 

Take Advantage of Opportunities

During times of economic volatility and uncertainty- we must stick to these guiding principles and by knowing our environment, assets should be allocated properly to take advantage of this opportunity. “In this current market, we want to be thoughtful in our approach,” says Petursson. “This means taking advantage of the dips and shifting into equities to take advantage of the opportunities as they present themselves.”

Don’t be Afraid of Noise

“While no one could have predicted that black swan event would land in 2020 and put a halt to the bull market, what we can do is manage risk based on fundamentals and make recommendations,” says Petursson. 

We can’t get too caught up in media noise. The media’s job is to sell headlines! I am not suggesting that this virus isn’t a serious issue but I am saying that things in the media tend to be a little… over exaggerated.

Focus on your investment goals! We must go back to the drawing board and assess what we can do to take advantage of situations like these. Markets trend upwards- they always have and always will. This is why buying opportunities like this should not be taken lightly as such events may not occur for another 10-15 years! 

Before we know it- the bear will go back into hibernation and the bull will be back stronger than ever before.