What stocks do well in bear market?
- Delek Logistics Partners, LP (NYSE:DKL)
- CVR Partners, LP (NYSE:UAN)
- Enterprise Products Partners L.P. (NYSE:EPD)
- Conagra Brands, Inc. (NYSE:CAG)
- Raytheon Technologies Corporation (NYSE:RTX)
- Lockheed Martin Corporation (NYSE:LMT)
- The Coca-Cola Company (NYSE:KO)
Think about the things consumers will need no matter what – those are the sectors that tend to perform well during market downturns. Even amid high inflation, people still need gas, groceries and health care, so things such as consumer staples and utilities usually weather bear markets better than others.
The most common place to set aside funds from that sell-off is a cash or money market account. A cash account, most commonly in the form of a bank or credit union savings account, is not tied to the stock market and presents little risk to investors.
With U.S. stocks down about 19% and bonds down 15% so far in 2022, this search for a seemingly elusive bottom can be exhausting. But we continue to encourage investors to remain patient and avoid chasing index-level bear-market rallies.
- ServiceNow, Inc. (NYSE: NOW)
- Alphabet Inc. (NASDAQ: GOOG)
- Amazon.com, Inc. (NASDAQ: AMZN)
- The Walt Disney Company (NYSE: DIS)
- Palo Alto Networks, Inc. (NASDAQ: PANW)
- The Boeing Company (NYSE: BA)
- Prologis, Inc. (NYSE: PLD)
- Johnson & Johnson (NYSE: JNJ)
- Mistake 1: Cashing in and avoiding volatility.
- Mistake 2: Not having enough money during a bear market.
- Mistake 3: Don't be too aggressive or get carried away with risky investments.
- Mistake 4: Investing in companies you don't understand during a bear market.
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Bear markets in the last five decades.
| Start Date | Peak Loss | Time to Bottom |
|---|---|---|
| November 1980 | 27.1% | 622 days |
| August 1987 | 33.5% | 101 days |
| March 2000 | 49.1% | 929 days |
So-called "defensive sectors" are parts of the economy that historically have typically held up well in downturns. The main defensive sectors are generally considered to be utilities, health care, and consumer staples, all of which have outperformed the broad market so far this year.
Since 1928, the S&P 500 has experienced 21 bear markets (not including the current downturn). That's approximately one every 4.5 years, on average. The average length of a bear market is 388 days. Excluding the longest and shortest bear markets, the average length is around 330 days -- or just under one year.
There are many ways to profit in both bear and bull markets. The key to success is matching the right investment tools to each market and using them to their full advantage. Short selling, put options, and short or inverse ETFs are a few bear market investments that allow investors to profit from market weakness.
Should I sell or hold in a bear market?
History shows us that the stock market has always recovered from market downturns and crashes. And we know times of economic weakness are eventually followed by times of growth. All of this means, in a bear market, ideally, you should hold shares of companies you believe in.
Diversifying into less risky stocks can minimize bear-market losses and offers long-term benefits. Going into cash during a bear market is likely to depress returns following the recovery for many investors.
The bear market in stock markets is forecast to intensify before giving way to more hopeful signals later in 2023, according to Goldman Sachs Research. The MSCI All Country World Index of global equities has fallen about 19% this year.
Bear markets tend to be short-lived.
The average length of a bear market is 289 days, or about 9.6 months. That's significantly shorter than the average length of a bull market, which is 991 days or 2.7 years.
| Company and ticker symbol | Performance year to date (percent) |
|---|---|
| Marathon Oil (MRO) | 86.5% |
| ExxonMobil (XOM) | 82.0% |
| Valero Energy (VLO) | 77.9% |
| Enphase Energy (ENPH) | 75.2% |
| Company | Price | Change |
|---|---|---|
| PAYC Paycom Software Inc | 318.76 | +9.79 |
| TYL Tyler Technologies Inc | 318.44 | +9.61 |
| PFE Pfizer Inc | 51.78 | +1.54 |
| VTR Ventas Inc | 45.14 | +1.32 |
- Reliance Industries.
- Tata Consultancy Services.
- HDFC Bank.
- Infosys.
Buffett employs a selective contrarian investment strategy. Using his investment criteria to identify and select good companies, he can make large investments (millions of shares) when the market and the share price are depressed and when other investors may be selling.
Should You Sell in a Bear Market? Many investors ask if they should sell stocks in a bear market. A smart investor will never sell during a bear market. Panic selling can ruin your portfolio and take you away from your financial goals.
While there is no one-size-fits-all number when it comes to how much cash investors should hold, financial advisors typically recommend having enough money to cover three to six months of expenses readily available.
When was the last major bear market?
The Last Bear Market (Before 2022)
The most recent bear market, which began on March 11, 2020, was triggered by the COVID pandemic. The Dow Jones Average fell from nearly 30,000 to under 19,000 but rebounded after barely a month as traders looked forward to an economic rebound.
The US bear market of 2007–2009 was a 17-month bear market that lasted from October 9, 2007 to March 9, 2009, during the financial crisis of 2007–2009. The S&P 500 lost approximately 50% of its value, but the duration of this bear market was just below average.
While recession can be a scary word for investors, Wells Fargo sees a light at the end of the tunnel in the second half of 2023. The firm's year-end S&P 500 price target is 4,300 to 4,500, implying roughly a 10% upside from current levels.
The best bear market stocks tend to be found in defensive sectors, such as consumer staples, utilities, healthcare and even some real estate equities.
The best approach to mitigate or manage a persistent bear market run is to invest in stocks with relatively low volatility and a long history of dividend growth. Most of these stocks are found in defensive sectors, including healthcare, consumer staples, utilities, defense, and some real estate equities.
- Turn off the noise. ...
- Live your life. ...
- Understand basis point performance reporting. ...
- Understand investment risk. ...
- Examine your portfolio's strategies. ...
- Stick to the (financial) plan. ...
- Remember that this bear market, too, will pass.
The good news is that it is possible to make money during a bear market, and it's easier than you might think. The key is to invest in strong companies and hold those stocks for the long term --regardless of what the market is doing.
According to Seeking Alpha — which analyzed every bear market since 1928 — the longest-ever bear market occurred in 1973-74, when it lasted 630 days, or about 21 months. The stock market shed about 48% during that period. The second-longest bear market, from 1980-82, lasted 622 days.
Investing in a bear market
According to the Wells Fargo Investment Institute study, the average 12-month return after the end of a bear market is 43.4%.
If you are a short-term investor, bank CDs and Treasury securities are a good bet. If you are investing for a longer time period, fixed or indexed annuities or even indexed universal life insurance products can provide better returns than Treasury bonds.
How can I invest in a 2022 bear market?
Hedge with bonds
Investing in bonds is also a common strategy to protect oneself during a bear market. Bond prices often move inversely to stock prices, and if stocks decline, a bond investor could stand to benefit. Short-term bonds in a bear market could help investors weather the (hopefully) short-term downturn.
In a bear market, stockholders tend to sell off their stocks as values are declining, so they don't lose more money. At this time, to balance their portfolios, they'll turn to gold and silver as safe assets for protection. Historically, when the market goes down, the price of gold goes up.
A bear market is when a market experiences prolonged price declines. It typically describes a condition in which securities prices fall 20% or more from recent highs amid widespread pessimism and negative investor sentiment.
- Keep Your Fears in Check.
- Use Dollar Cost Averaging.
- Play Dead.
- Diversify.
- Invest Only What You Can Afford.
- Look for Good Values.
- Take Stock in Defensive Industries.
- Go Short.
For traders, downturns and bear markets offer great opportunities for profit because derivative products will enable you to speculate on rising and falling markets.
Utilities: Energy companies do well during a recession because people still need electricity, gas, and water. Health care: People will still need to visit the doctor, purchase medication, and spend money on items related to health care.
Phases of a Bear Market
Bear markets usually have four different phases. The first phase is characterized by high prices and high investor sentiment. Towards the end of this phase, investors begin to drop out of the markets and take in profits.
The S&P 500 began its descent in early January, but it didn't officially enter a bear market until June 13, 2022 -- or 121 days ago, as of this writing.
All of these market crashes have one thing in common. They didn't last forever. In fact, the average length of a bear market for the S&P 500 is just 289 days. That's not a typo.
The jobs that are the “first to go” when a recession hits are the ones that depend on consumer spending and people having copious disposable income, says Kory Kantenga, a senior economist at LinkedIn. Retail, restaurants, hotels and real estate are some of the businesses often hurt during a recession.
What is the safest stock during a recession?
Health-care stocks tend to be safer during recessions for the same reason as consumer staples: The services and products they offer are always in demand. This sector includes companies in the biotech, pharmaceutical and health care equipment industries, as well as health care providers and services.
- Delaying major purchases like home or car. 34%
- Paying down debt. 29%
- Planning to reduce holiday spending. 28%
- Allocating more income to savings. 24%
- Staying in a job they don't enjoy. 14%
Consumer staples stocks mostly do well because price increases are passed on to consumers. Mortgage-backed securities (MBS) and collateralized debt obligations (CDOs) are risky choices but tend to perform well under inflationary pressure.
No less than 19 S&P 500 stocks, including consumer staple Walmart (WMT), health care Baxter International (BAX) and tech stock Analog Devices (ADI), beat the S&P 500 during all of the past five recessions, says an Investor's Business Daily analysis of data from S&P Global Market Intelligence and MarketSmith.
Another necessity that people can't or won't cut back on is healthcare. People need their health to work, play and relax, no matter the economic climate. As a result, hospitals, insurance firms and pharmaceutical companies often remain steady during recessions.
