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Not all Bear Markets are Created Equal

| April 13, 2020
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Bear markets can be categorized as structural, cyclical, or event-driven, with each having their own unique set of characteristics. Although it’s important to recognize the impact that each bear market can have on financial markets, it becomes even more critical to realize which one we’re currently faced with. The impact from COVID-19, alongside an oil price war that blindsided the globe, have produced an immense impact to the current event-driven bear market of 2020. The reason we’re pointing this out is because event-driven bear markets are scary enough to produce a shock factor to the economy, yet they are also daunting enough to quickly disappear prior to investors taking advantage of the situation. The fact that event-driven bear market dislocations are often the fastest to disappear is an observed historical occurrence dating back to the late 1800s. By being cognizant of the facts and data behind the current environment, the notion of remaining objective becomes paramount given that emotions can often bias us in potentially making the wrong decision. We are now at a critical junction point where investors should carefully assess their ability, and willingness, to favor risk assets such as equities.

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Edison Byzyka, CFA – Chief Investment Officer

 

Investment advice offered through CX Institutional, a registered investment advisor.

Securities offered through LPL Financial. Member FINRA/SIPC. CX Institutional is a separate entity from LPL Financial.

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investment(s) may be appropriate for you, consult your financial advisor prior to investing. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and cannot be invested into directly. The economic forecasts set forth in the presentation may not develop as predicted.

All return data sourced from Bloomberg.  All other data soured from Bloomberg, through the release of monthly figures from the Department of Labor, Bureau of Economic/Labor Statistics, U.S. Census Bureau, or from the Federal Reserve and any of its affiliated regional locations. 

Small Business Optimism sourced through NFIB.  Small business hiring plans sourced through NFIB. Consumer sentiment sourced through the University of Michigan. 

Earnings data sourced through Bloomberg Intelligence and through Bloomberg’ earnings analysis composites. 

Interest rate cut/rise probabilities are sourced from Bloomberg’s tracking of futures contracts tied to the Federal Funds interest rate

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