The Tom Dupree Show

The Tom Dupree Show

3 Reasons I Am Excited During This Down Market

October 17, 2022

We are in the midst of a down market, and I am excited about it.

Look, I know you are likely worried about your portfolio.

There is uncertainty, and the headlines are frightening. Inflation has run amuck, and your investments are losing value.

You’ve worked hard for your money, and so have I.

And now, you might find you have lost more in your investments than you earned at work.

You are frustrated, and I get it!

At times, we all become frustrated watching the values of our retirement assets shrink in value. You might begin to think, “what is the point of this?” And you might be beginning to think you should just sell everything a run for the hills.

If you don’t listen to anything else I say, please don’t do that!

The market’s best days may be ahead of us. And now could be the right time to invest!

For at least 3 reasons, I have always liked bear markets and so should you.

Market Selloffs Usually Do Not Last Long!

Down market does not last long

Let’s face it, nobody likes to see their investments fall in value. At times, it is just downright painful. The down market we are currently seeing is certainly not the first time there has been a correction in equities, and it most likely won’t be the last.

This might not be very comforting right now. But one thing I do like about bear markets is that, even though it may feel like it while you are living through one, they tend to be fairly short-lived. In fact, the average length of a bear market is about 9.5 months. This is about a third as long as the average bull market which lasts on average 2.7 years

Over the last century, the market has been a raging bull about 80% of the time. So, bear markets have only existed 20% of the time.

And when the market takes off again, it will likely do so with an unforeseen bang.

The Best Days Actually Occur in Bear Markets

best days happen in down market

I know this sounds counterintuitive, but another reason I like bear markets is that the very best-performing days over the past 15 years actually happened right in the midst of them. The ones that fell outside of a bear market were just as we exited a bear market and before anyone really knew the bear market was actually over.

Yes, you read that right! 

Those tremendous days happened in the environment we find ourselves in today. The best ten days (in the past 15 years) in the S&P 500 are as follows:

  1. October 13, 2008 (up 11.6%)
  2. October 28, 2008 (up 10.8%)
  3. March 24, 2020 (up 9.4%)
  4. March 13, 2020 (up 9.3%)
  5. March 23, 2009 (up 7.1%)
  6. April 6, 2020 (up 7.0%)
  7. November 13, 2008 (up 6.9%)
  8. November 24, 2008 (up 6.5%)
  9. March 10, 2009 (up 6.4%)
  10. November 21, 2008 (up 6.3%)

Of those 10 best days- over the past 15 years- 5 of them occurred during the bear market that occurred during the financial crisis of 2008. That bear market started in October 2007 and ended on March 9, 2009. Another two of them occurred when we didn’t really know we were out of the woods. On March 10, 2009, the S&P 500 was up 6.4% and just less than two weeks later on March 23, 2009, the index was up 7.1%.

Additionally, the bear market of 2020 started on February 20, 2020, and ended on April 7, 2020. During this time, the other 3 best days over the past 15 years occurred. Two of them were in March and the third in April.

And for your long-term wealth, it is imperative not to miss those great days. Just missing out on the best 10 days in the last 15 years would have dramatically affected your investment returns.

For example, if you had invested $100,000 in the S&P 500 at the end of 2006 and left it alone for 15 years, it would have been up about 355%. If you missed out on the ten best days, your investments would have only grown by approximately 109%. That is a huge gap to overcome.

I Like Investing in Bear Markets Because I Can Find Value

value exists in down markets

The #1 reason that we actually like bear markets is that, in the past, we have found tremendous investment opportunities during these times. 

Our approach to investing is value oriented. And as a firm, we seek undervalued companies that have a tremendous upside for our clients. It is exactly the climate we are in right now that proves my mettle as an investment advisor. We help investors, like you, with our approach to long-term strategic investments. When the market is hot, most stocks perform well. Even those run by an emperor with new clothes seem to perform well, and investors flock to growth at any price. However:

“Only when the tide goes out can you see who is swimming naked” – Warren Buffett

In down markets, you can start to see the underbelly of companies. The highfliers often fall in price and the value-oriented approach that our clients receive from investing with Dupree Financial Group, LLC tends to be steadier in comparison.

And when we find tremendous value for our clients in bear markets, it keeps me encouraged! We just came back from a trip to Houston where we visited several companies that we currently invest in and are considering a further investment. I was excited by several opportunities that we found while on this trip.

Opportunities abound!

opportunities abounds in a down market

As of June 30, 2022, the price-to-book ratio on the S&P 500 was at 3.78 compared to 4.43 just twelve months ago. Additionally, 30 members of this index are actually trading below book value. The average P/E multiple stood at 19.69 on June 30, 2022. That’s much cheaper than twelve months ago when it stood at 27.07.  Furthermore, 84 of the 500 actually carry a multiple below 10. Quite a few of these 84 companies are beaten down for no other reason than a price reassessment based on interest rate increases. They appear to be extremely undervalued.

Invest With Dupree Especially in This Down Market

Our value-oriented approach to investing could be exactly what you need right now. As the tide has been going out, we can more clearly see who might be swimming naked. What we have found could be a tremendous value for your portfolio. 

Before you make any decisions about your portfolio, you should contact Dupree Financial Group, LLC for a free consultation during this down market. It never hurts to have another set of eyes take a look at your portfolio. Make sure that your portfolio suits your needs for the stage of life you are in… or retirement and beyond.

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