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Labels don't matter; perspectives do
Last week’s post laid out five things to remember during a bear market. At the time, the S&P 500 was down about 18%, just above the 20% threshold of an official bear market. The small cap Russell 2000 and tech-heavy Nasdaq 100 were each down more than 20%. A week later, the S&P 500 has still not dipped below the 20% marker.
The S&P 500 rose 1.43% and the Russell 2000 gained 1.39% since last week’s post (5/18 close to 5/25 close). This puts the large cap S&P 500 around a 16% decline from the January 3rd high and the Russell 2000 just around 20%.
If markets have found a bottom and continue to rise from here, the S&P 500 will officially not have reached bear market status. Does this matter for investors? Declining markets are a cause for concern irrespective of any official labels ascribed to it. Nineteen percent declines (or 18%, 17%...) are painful to deal with. The lessons from last week’s post still hold.
A market decline’s affect on investors is a function of their risk tolerance and portfolio construction. Those with longer time horizons can absorb near-term volatility and even capitalize from it. Those with shorter horizons and near-term needs hopefully have a portfolio that helps protect their wealth from episodes like this.
Read the linked article from our partners at eMoney to learn more.