Maybe the reason so many murders occur after dark is the darkness itself, which can overwhelm our emotions. While murder is sometimes a rational act, I suspect it’s mostly a highly emotional deed.
I have a rule that I never make decisions in the middle of the night—especially if I’ve woken up in the dark. Everything always looks worse then.
Sometimes I don’t even remember the decisions I made in the night, but when I do, I almost always revise them to be less drastic, or discard them altogether. Light dispels darkness.
The stock market can be thought of as a place of long days and short nights. If bull markets are the days of the stock market, then bear markets are the nights—and they don’t tend to last very long. The average bull market lasts 48 months, while the average bear market lasts 18. But during those 18 months, it seems to get increasingly darker.
With the exception of the pandemic bear market in 2020, every bear market has been accompanied by a large number of predictions of doom. “Things are different now,” people say. “The good times you remember are never coming back.” Their reasons are many and well thought out. The most convincing ones that are made by well-known personalities get widespread attention.
Bear markets are when news agencies, feeds, and other platforms really make their money, as they compete with each other to bring you ever scarier and more convincing forecasts of doom. You and the many millions of other investors are emotional beings. You respond to emotional headlines, and fear is the most powerful of all emotions.
Fear-mongering headlines receive attention at all times, even in good times. But they receive much more attention in difficult times. And in the darkness of a bear market, those fear-filled stories feed our worst thoughts: “I’m going to lose everything.” “I won’t be able to retire—ever.” “I’ll be ruined. Homeless.”
But what you should really fear are the fear mongers, and even more, the emotional decisions you might make in the dark.
I want to be clear. It’s important to be informed. Ignorance is just another kind of darkness. This is not about avoiding information and important news. This is about avoiding the fear mongers, talking heads, and well-known experts that gain notoriety from telling you very scary things.
Just remember, bear markets are the nighttime of the stock market. I never make decisions in the middle of the night. All my fears are so much larger in the dark. Murder happens in the dark.
So when will the dark bear market end?
Markets are made up of huge numbers of buyers and sellers. Markets go up when the buyers are buying more shares than the sellers are selling. And they go down when it’s the opposite scenario. Pretty simple, right?
Bear markets end when there are no longer enough fearful sellers to overwhelm the buyers and drive prices still lower.
On Wall Street, there’s a saying that no one rings a bell at the bottom. And that’s very true. As the intense fear subsides, there’s no all-clear signal for would-be buyers to know it’s time to rush in and buy. Most bear markets end quietly. Fear subsides, but the buyers have had many disappointments in recent times, so they tend to come back slowly and carefully. And like that, the market tiptoes its way back slowly and carefully.
The end of bear markets tends to be characterized by intense pessimism. Extreme fear rules the day. And then slowly, like the weak light of predawn, the darkness subsides. Buyers gradually come in and the market slowly rises.
The news may not change. Once the fear crescendos, there just aren’t enough sellers left to drive the market down. In this environment, only a little buying can move the market higher.
Earlier in this article I mentioned that bear markets have lasted an average of 18 months. We are 11 months into this one. In the analogy of nighttime, we are at about 1:30 a.m. This reminds me of an old saying: “Never make decisions after midnight.”
If you are in the market and have stayed all through this bear market, then you should probably keep on keeping on. Neither bull markets nor bear markets last forever.
Hal Masover is a Chartered Retirement Planning Counselor and a registered representative. His firm, Investment Insights, Inc is at 508 N 2nd Street, Suite 203, Fairfield, IA 52556. Securities offered through, Cambridge Investment Research, Inc, a Broker/Dealer, Member FINRA/SIPC. Investment Advisor Representative, Cambridge Investment Research Advisors, Inc., a Registered Investment Advisor. Investment Insights, Inc & Cambridge are not affiliated. Comments and questions can be sent to firstname.lastname@example.org These are the opinions of Hal Masover and not necessarily those of Cambridge, are for informational purposes only, and should not be construed or acted upon as individualized investment advice. Investing involves risk. Depending on the types of investments, there may be varying degrees of risk. Investors should be prepared to bear loss, including total loss of principal. Past performance is no guarantee of future results.
Indices mentioned are unmanaged and cannot be invested in directly.