tastytrade logo
Don't fear the bear market, person high-fiving bear

May 27, 2022

Don’t Fear the Bear

By:Josh Fabian

Watch more episodes of Sosnoff & Ratigan: Truth or Skepticism

The unofficial start to summer is upon us this weekend and it couldn’t get here fast enough for people in Chicago and the stock market. For people in Chicago, the 40-something degree temperatures in the morning have gotten old. For the market, the last couple months have been, well, yeesh.

Are Bear Markets Bad?

One of the first things you often hear about markets is that they’re cyclical. Bear markets follow bull markets and bull markets follow bear markets. It’s just how things work. Panicking in the face of a bear market is semi understandable, but it’s also unnecessary.

A bear market is defined as a 20% pullback from its highs. For the Nasdaq, we’ve met that threshold and then some. The S&P 500 has flirted with that 20% number but managed to stay out of technical bear market territory. But the question we should be asking is, are bear markets bad?

The average bull market lasts just under 3 years. Historically, equities have returned around 8% annually with dividends. In the last decade, the S&P 500 has averaged over 14% and the Nasdaq has returned over 23% not including 2022 (if you include 2022 that average is still over 18%). And we haven’t seen a bear market since the end of the housing crisis. In other words, this market is extended and that has consequences, both good and bad.

The good is pretty obvious. If you’ve been long in this market for the last decade, you’re probably loving capitalism. But for the vast majority of people, stocks are unaffordable and perhaps aside from your 401K, you haven’t participated much and the income inequality gap has widened to your detriment.

Bear Markets Create Opportunity

A bear market is not the end of the world. In fact, it can be good. From time to time, markets need to burn a little, like a controlled forest fire, so new life can spring up. Companies with undeserving valuations should see money flow out and into companies with better potential. Those are the companies that will create jobs. Those are the companies that will largely form our future. Those are the companies that will innovate.

Bear markets are not to be feared. They are simply a part of the circle of life. Bear markets are creative destruction on a mass scale. They create opportunities. So instead of panicking if markets continue pulling back that the end of the world is upon us, try embracing the opportunity they create and know there’s a bull market coming next.

Written by Dylan Ratigan and Josh Fabian

Options involve risk and are not suitable for all investors. Please read Characteristics and Risks of Standardized Options before deciding to invest in options.

Related Posts

tastytrade content is provided solely by tastytrade, Inc. (“tastytrade”) and is for informational and educational purposes only. It is not, nor is it intended to be, trading or investment advice or a recommendation that any security, futures contract, transaction or investment strategy is suitable for any person. Trading securities can involve high risk and the loss of any funds invested. tastytrade, through its content, financial programming or otherwise, does not provide investment or financial advice or make investment recommendations. Investment information provided may not be appropriate for all investors, and is provided without respect to individual investor financial sophistication, financial situation, investing time horizon or risk tolerance. tastytrade is not in the business of transacting securities trades, nor does it direct client commodity accounts or give commodity trading advice tailored to any particular client’s situation or investment objectives. Supporting documentation for any claims (including claims made on behalf of options programs), comparison, statistics, or other technical data, if applicable, will be supplied upon request. tastytrade is not a licensed financial advisor, registered investment advisor, or a registered broker-dealer. Options, futures and futures options are not suitable for all investors. Prior to trading securities products, please read the Characteristics and Risks of Standardized Options and the Risk Disclosure for Futures and Options found on tastyworks.com. 

tastytrade is a trademark/servicemark owned by tastytrade.

tastyworks, Inc. ("tastyworks") is a registered broker-dealer and member of FINRA, NFA and SIPC. tastyworks offers self-directed brokerage accounts to its customers. tastyworks does not give financial or trading advice nor does it make investment recommendations. You alone are responsible for making your investment and trading decisions and for evaluating the merits and risks associated with the use of tastyworks’ systems, services or products. tastyworks is a wholly owned subsidiary of tastytrade, Inc (“tastytrade”).

tastyworks, Inc. (“tastyworks”) has entered into a Marketing Agreement with tastytrade (“Marketing Agent”) whereby tastyworks pays compensation to Marketing Agent to recommend tastyworks’ brokerage services. The existence of this Marketing Agreement should not be deemed as an endorsement or recommendation of Marketing Agent by tastyworks. tastytrade is the parent company of tastyworks. tastyworks and Marketing Agent are separate entities with their own products and services. tastytrade has different privacy policies than tastyworks.

Quiet Foundation, Inc. (“Quiet Foundation”) is a wholly-owned subsidiary of tastytrade The information on quietfoundation.com is intended for U.S. residents only. All investing involves the risk of loss. Past performance is not a guarantee of future results. Quiet Foundation does not make suitability determinations, nor does it make investment recommendations. You alone are responsible for making your investment and trading decisions and for evaluating the merits and risks associated with the use of Quiet Foundation’s systems, services or products.

Small Exchange, Inc. is a Designated Contract Market registered with the U.S. Commodity Futures Trading Commission. The information on this site should be considered general information and not in any case as a recommendation or advice concerning investment decisions. The reader itself is responsible for the risks associated with an investment decision based on the information stated in this material in light of his or her specific circumstances. The information on this website is for informational purposes only, and does not contend to address the financial objectives, situation, or specific needs of any individual investor. Trading in derivatives and other financial instruments involves risk, please read the Risk Disclosure Statement for Futures and Options. tastytrade is an investor in Small Exchange, Inc.

© copyright 2013 – 2022 tastytrade. All Rights Reserved. Applicable portions of the Terms of use on tastytrade.com apply. Reproduction, adaptation, distribution, public display, exhibition for profit, or storage in any electronic storage media in whole or in part is prohibited under penalty of law, provided that you may download tastytrade’s podcasts as necessary to view for personal use.