What if the Bear Market is OVER?

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By Michael A. Gayed, CFA

Portfolio Manager of the ATAC Rotation Funds

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Bob Farrell is a legendary Wall Street trader and market analyst. He’s perhaps best-known for his “10 rules” of investing that he developed based on his 50-year career in the industry. One of the more popular rules says that “when all the experts and forecasts agree, something else is going to happen.”Right now, almost everyone is expecting a recession driven by high inflation, rising interest rates and geopolitical risks. The S&P 500 is still more than 10% off of its highs, while the NASDAQ 100 is down by more than 20%. Many feel as if more downside is ahead, but what if they’re wrong? What if the bottom is already in? What if the worst is over?

My take? I have no idea. I believe there’s still a bigger and more traditional classic “risk-off” period coming where stocks decline and Treasuries rally in price (which is what historically happens during periods of heightened equity volatility), but the path to get there is what drives investor sentiment. And like everyone else in this business, I can’t tell the future. All I can do is identify conditions in a rules-based fashion that favor an outcome.The important thing to remember here is that the market isn’t the economy. The financial markets are often leading indicators of where investors feel things are going. The actual data is only showing how conditions are or were.

Take the 2020 COVID recession, for example. Once the government announced its multi-trillion dollar stimulus program, stock prices shot higher even though the worst of the economic pain had yet to be experienced.Today, some of the data isn’t even indicating imminent danger.
High yield spreads tend to blow out ahead of a recession. They’re currently not at the levels reached during 2016, 2018 or 2020. Investors often view the 10-year/2-year Treasury yield spread as the “recession indicator”. This number did briefly turn negative earlier this year, but has remained in positive territory ever since. While both of these numbers have teased the idea of higher risk conditions ahead, neither has done so in convincing fashion yet.Also consider that the markets tend to be very sensitive to what the Fed does. If the central bank ever decides that recession risk is too high and it hits the pause button on the rate hiking cycle, it could be off to the races again for equity prices. Risk asset prices have the ability to react favorably to looser monetary conditions. Any pivot in that direction could give a big boost to investor sentiment.

If the bear market is over, the ATAC Rotation Fund (ATACX), the ATAC U.S. Rotation ETF (RORO) and the ATAC Credit Rotation ETF (JOJO) could be primed to benefit.We believe all three funds use proven market signals to determine whether they should be positioned either offensively or defensively. Since investors often flock to safety in times of market volatility, the three funds use Treasuries as the “risk-off” or defensive asset class. Admittedly, Treasuries haven’t acted as they historically do relative to equities when in high volatility states. But that doesn’t mean things won’t revert back to historical behavior in the small sample of the here and now.When the signals suggest that conditions are more favorable, the funds can go “risk-on”.

In the case of RORO and ATACX, that could include some combination of large-cap stocks, small-caps and emerging markets. JOJO remains in the fixed income markets and targets junk bonds in this scenario.RORO and ATACX also use leverage, which offers higher return potential. Why? Because leveraging equities when risk-on helps to, over time, counter the impact of being in Treasuries when stocks continue to move higher and with hindsight, risk-off positioning there wasn’t warranted.

Of course this is a double-edged sword, since in a year like this year, the leveraged risk-on position in stocks earlier in the year led to a sizeable decline for both ATACX and RORO. However, over multiple roll of the die, it is that leverage which gives investors the opportunity to capture above average returns in more traditional markets when combined with occasional risk-off periods where Treasuries perform well.High volatility markets don’t need to be feared.

We believe strategies that add and remove market risk based on what the market is telling us give investors the opportunity to earn superior risk-adjusted returns while lowering downside risk. If the markets are ready to begin the next leg higher, the ATAC funds stand ready to benefit while (hopefully) Treasuries get back to doing what they normally would in true risk-off periods .

At some point.

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What is a Stock Market CORRECTION?

By Staff Reporters

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A correction is a decline of 10 percent or more from an asset’s most recent high. For a stock that recently reached an all-time high of $100 per share, a correction would occur if the stock fell to $90 or lower. Corrections can happen in any financial asset such as individual stocks, broad market indexes like the S&P 500 or commodities. The S&P 500 fell below 4,336 in January 2022, marking a more than 10 percent decline from its high earlier in the year.

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Corrections can be caused by a number of different factors and they’re difficult, if not impossible, to predict ahead of time. Short-term concerns about economic growth, Federal Reserve policy, political issues or even a new variant of the COVID-19 virus all have the potential to trigger market corrections. These issues make investors fearful that their prior assumptions about the future might not be correct. When people are fearful, they typically look to sell stocks in favor of assets considered safer such as U.S. Treasury bonds.

CITE: https://www.r2library.com/Resource/Title/082610254

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Difference between a correction and a crash

A stock-market correction may sound similar to a crash, but there are some key distinctions between the two. A crash is a sharp drop in share prices, typically a double-digit percentage decline, over the course of just a few days. A correction tends to happen at a slower pace, therefore making the drop less steep than a crash would be. One of the most famous stock-market crashes happened in October 1987, when the Dow Jones Industrial Average fell 22.6 percent in a single day that became historically known as Black Monday.

Corrections are more subtle and are sometimes even thought to be healthy for rising markets because they help things from becoming overheated. Like their name suggests, they correct prices back down from a slightly elevated level.

Difference between a correction and a bear market

The difference between a correction and a bear market is in the magnitude of the decline. A correction is a decline of at least 10 percent, but less than 20 percent, while a bear market begins at a decline of at least 20 percent from a recent peak. Bear markets also tend to last longer than corrections because they tend to reflect an economic reality, such as a recession, rather than a short-term concern that may or may not materialize. The challenge for investors is that it’s very difficult to determine in real time whether a market is just in a correction or if it could become a bear market.

Related: https://medicalexecutivepost.com/2022/05/16/update-stock-market-sentiment-and-capitulation/

MORE: https://www.merrilledge.com/article/how-weather-stock-market-correction

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Of Doctors, Bull and Bear Markets

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Of Bull and Bear Markets

By Dr. David Edward Marcinko MBA CMP®

SPONSOR: http://www.CertifiedMedicalPlanner.org

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A bull market is generally one of rising stock prices, while a bear market is the opposite. There are usually two bulls for every one bear market over the long term.

More specifically, a bear market is defined as a drop of twenty percent or more in a market index from its high, and can vary in duration and severity. While a bull market has no such threshold requirement to exist, other than they exist between these two periods of sharp decline.

Whither the Bear? 

As a doctor, your action plan in a bear market depends on many variables, with perhaps your age being the most important: 

In your 30s:

  • Pay off debts, school or practice loans.
  • Invest in safe money market mutual funds, cash or CDs.
  • Start retirement plan or 401-K account. 

In your 40s:

  • Increase your pension plan or 401-K contributions.
  • Stay weighted more toward equity investments.
  • Review your goals, risk tolerance and portfolio. 

In your 50s:

  • Position assets for ready cash instruments.
  • Diversify into stock, bonds and cash. 

Retirement:

  • Maintain 3 years of ready cash living expenses.
  • Reduce, but still maintain your exposure to equities.

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Bear + A Falling Stock Chart

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Assessment

Conclusion

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[Dr. Cappiello PhD MBA] *** [Foreword Dr. Krieger MD MBA]

Front Matter with Foreword by Jason Dyken MD MBA

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REVIEW: Stocks and Sectors in Bear Territory

A Historic Review

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Assessment

A correction is typically defined as a 10% drop for a stock or an index from a recent peak, while a bear market is a 20%-plus decrease.

Conclusion

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The Bear MARKETS and Cyber ECONOMY

By Staff Reporters

  • Markets: Stocks dropped sharply in the post-Thanksgiving trading session on Friday due to concerns over the new Covid variant, Omicron. The Dow fell 2.5% for its worst day of the year, and the S&P also tumbled 2.3%. Oil prices and travel stocks also got rocked given fresh worries over travel demand, while “stay-at-home” names like Peloton and Zoom got a boost.
See the source image
  • Economy: It’s still way too early to know the impact of Omicron on economic growth. As we laid out last week, the Fed is under pressure to accelerate the winding down of its stimulus measures in order to battle inflation, but the new variant could change the calculus. Investors dialed back their expectations of a sooner-than-expected rate increase on Friday.

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On Bull -OR- Bear Markets?

YOU DECIDE AND OPINE

By Dr. David E. Marcinko MBA

The Plot Thickens

Autumn is here, and leaves aren’t the only thing falling.

Bull market breaks a new record on Wall Street. So what's a bull market? -  ABC News

After seven months of higher monthly closes, plus one record-setting high early in the month, the benchmark S&P 500® Index wobbled its way to a 5% pullback in September. The causes were many—uncertainty emanating from Washington, inflation, supply chain problems, and softer earnings growth forecasts—and now the horizon is looking foggy as we gaze ahead toward the final months of 2021.

Shipping bottlenecks and a near-record number of job openings are raising costs and putting upward pressure on wages, which may start to hurt profit margins, and the twin specters of inflation and higher interest rates are making investors wonder when the Federal Reserve might step in to raise interest rates.

Related: https://medicalexecutivepost.com/2016/03/18/doctors-and-bull-and-bear-markets/

But, if there’s a potential bright spot, we have to look across the sea to the Eurozone, where the signs point toward an era of increased government spending that could be positive for global economic growth.

CITE: https://www.r2library.com/Resource/Title/0826102549

And then came October, 2021; thus far!

Bull -OR- Bear?

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Why the Stock Markets CRASHED TODAY [9/20/21]?

Feel Free to Add to the Our Growing List of Reasons!

BUT REMEMBER THAT CORRELATION IS NOT CAUSATION

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BY DR. DAVID E. MARCINKO MBA CMP®

SPONSOR: http://www.CertifiedMedicalPlanner.org

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Chart: The Worst Stock Market Crashes of the 21st Century | Statista

THE LIST GOES ON

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China’s Evergrande Project Giant Contagion Jitters

Global and International Market Meltdowns

Crypto-Currency and Gas Price Tumbles

Depressed Automobile Rentals and Used Car Prices

Lowering US Treasury Bond Yields

US Debt Ceiling Risks and Looming Federal Shutdown

Travel Bans with Mask & Vaccine Debates During the Corono-Virus Pandemic

The $3.5 Trillion Dollar Senate Bill

Politics and Potential Federal Tax Law Changes

The National Park, Pacific North-West and California Wild Fires

The Weather, Flooding, Tornadoes, Hurricanes and Tropical Storms

Southern Border Immigration Crisis

A Dearth of Micro-Chips

Quadruple Witching Friday

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CORRECTION? https://www.msn.com/en-us/money/markets/the-odds-of-a-20-correction-in-stocks-are-rising-as-the-market-transitions-to-the-next-stage-of-its-cycle-morgan-stanley-warns/ar-AAODytg

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Feel free to add to our list.

Is this the start of a cyclical bear market?

MORE: https://medicalexecutivepost.com/2018/12/22/stocks-and-sectors-in-bear-territory/

RELATED: https://medicalexecutivepost.com/2016/03/18/doctors-and-bull-and-bear-markets/

MORE: https://medicalexecutivepost.com/2007/11/25/of-bull-and-bear-markets/

EVERGRANDE: https://www.msn.com/en-us/money/markets/evergrande-s-debt-crisis-has-jolted-the-stock-market-here-s-why-everyone-s-suddenly-worrying-about-china-s-2nd-largest-property-developer/ar-AAODW0q

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What If the Stock Market Falls 30%?

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Are YOU ready, Doctor?

By Michael Zhuang,

[Principal of MZ Capital Management – Contributor to Morningstar and Physicians Practice]

Ever since it touched bottom on March 9th, 2009, the market has been going up and up and up with barely any hiccup. That’s dangerous! Because our minds could get complacent. That’s why I want to do a mental exercise with all of you: What would you do if the market falls 30%?

First of all, recognize these two important facts:

1.    Market fall of 30% and above happened every ten years or so.

If we use history as a guide, we should expect a 10% odds of that happening over the next 12 months. (So don’t be surprised.)

2.    All market tumbles of that magnitude were recovered within 18 months in the US. (So don’t despair.)

So instead of seeing a 30% fall a bad thing: a horrible hit to your wealth, how about seeing that as a good thing: a deep discount of productive assets on sale that happens only once every decade.

Here is what you should do before, during and after a 30% fall of the market.

1.    Start with having an appropriate asset allocation. Depending on your age and risk tolerance, maybe it’s a 70/30 portfolio, or a 60/40 one, or a 50/50 one.

2.    Stick to it through good market and bad.

3.    Rebalance periodically or opportunistically

Let’s take a 50/50 portfolio for example. After the (stock) market tumble of 30%, the portfolio becomes 35/65. To rebalance back to 50/50, you must sell appreciated bonds and buy discounted stocks.

When you do the above over and over, you create a system of buying low and selling high.

An additional note on rebalance, to keep it simple, you can rebalance every year. The optimal rebalance however, is opportunistic not periodic. The research on that was published in Journal of Financial Analyst and it suggests a rebalance when an asset class has deviated from its target allocation by 20%. When this is done right, you can add about 40 basis points in excess return.

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stock market

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Conclusion

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Speaker: If you need a moderator or speaker for an upcoming event, Dr. David E. Marcinko; MBA – Publisher-in-Chief of the Medical Executive-Post – is available for seminar or speaking engagements. Contact: MarcinkoAdvisors@msn.com

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On Recent Stock Market Losses

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Should Physician Investors Be Concerned?

Lon JefferiesBy Lon Jefferies MBA CFP®

Many doctors and some investors viewed the end of January and early February as a pretty scary time. Over a period of just 12 trading days (1/15-2/3), the S&P 500 lost -5.76%. This spurred conversations online and in the media about the end of a long bull market run and even the possibility of a bubble. However, since the end of that tough stretch, the market has responded strongly and is again reaching new all time highs.

What’s Up!

So what happened during that short time span to cause such a response? Was it a concern about the health of emerging markets that caused such a scare, or perhaps the threat of rising interest rates? Did the uncertainty of having a new Fed chairman cause a pullback in the market, or maybe the concern of a terrorist attack in Sochi during the Olympics? These are all clearly issues that obtained a good amount of short-term attention, but I’d contend that none of them were the root cause of the market decline.

Historical Review

History illustrates time and again that market volatility leads to memory problems for many investors.  Check out this chart itemizing all market corrections of 5% or more since the bull market began.

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original_19861592

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As you can see, although the S&P 500 index has increased in value from 676.53 on March 9, 2009 to 1,819.75 on February 11, 2014, the S&P 500 has endured nine pullbacks of over 5% during that time frame.

As illustrated by the lengths of the red lines associated with each correction, many of these market declines happened over a similarly short time span.

Consequently, despite the S&P increasing in value by 169% over the last five years, the market has experienced a decline of at least 5% every six and a half months on average.

In fact, nearly a third of the months since the bull market began have seen the market decline, and by an average of 3% per month.  Considering this information, late January and early February wasn’t particularly unusual.

Periodic Pull-Backs

These periodic market pullbacks aren’t specific to the recent strong run. Historically, we typically see three stock market dips of 5% or more every year and one correction of more than 10% every 20 months. Yet, for some reason, the same conversations and concerns are repeated during every market correction. Investors wonder if this is the beginning of an extended market decline or even a crash?

People consider selling their assets and taking their money out of the market. It is so easy to forget that we have seen similar circumstances in the past and that very rarely has anyone benefitted from selling.

Refer back to the chart itemizing all market corrections over the last five years. There wasn’t a single market decline that didn’t recoup all value in a short period of time. Even the 20% decline that occurred in 2011 only took nine months to go from peak to trough to new all time high.

Assessment

As a result, I’d suggest that the January decline in the markets is not only nothing to be concerned about, but it is expected and healthy. In fact, if you have done your homework as an investor and have a well diversified portfolio with a stocks/bonds ratio that matches your risk tolerance, you’ll be hard-pressed to find a market movement that justifies dramatic action.

Of course, there will always be market corrections (even the occasional crash), but as long as your portfolio is built to accurately match your investment time horizon, market values are likely to recover before the pullback is catastrophic to your retirement goals. Next time the market experiences a short-term correction, remember it isn’t anything we haven’t seen before.

Conclusion

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