Last year we were told that inflation was transitory. This year we learn that it is more persistent. And now investors have entered a bear market. Investors may be wondering how transitory or persistent this bear market may be. I wish we knew, but those kinds of things are only known after the fact. But recalling historical events can help us put today’s circumstances in correct perspective.
The Great Depression was transitory. So was the Civil War and every war mankind has engaged in. The Great Financial Crisis was transitory. Basically, anything that happens in life, no matter how long it lasts, is transitory so long as it has an end…eventually.
The definition of transitory is “of brief duration, not persistent.” But therein lies the ambiguity. How long is brief? How we define “brief” is subjective. It is based on the individual, the time horizon, and the activity undertaken. Is 30 minutes brief? Not if you are holding your breath. What if you are an investor? 30 minutes shouldn’t even register.
We may amuse ourselves debating how transitory the bear market will be, but what really matters is that a bear market can cause great damage regardless of how transitory it is.
Millions have died in “transitory” wars. Many people suffer throughout their lives due some “transitory” abuse they experienced. Many investors had to significantly adjust their lifestyle from the transitory Great Financial Crisis because they may have sold during a transitory bear market and made their loss permanent by realizing those losses.
Historically, the markets have never not recovered from a significant downturn. The adage, “this too shall pass” is embraced by some of the most successful investors. Investors that construct an investment strategy in line with their situation, needs, goals, and risk preference may be able to better withstand the transitory bear markets.
Most investors have a long-term strategy and plan. But we may still be influenced to make financial decisions based on transitory headlines and market movements. One of the helpful things that you can do during a difficult time in the market is ask yourself: Is this situation transitory? You will find that crises, while they may last a while, tend to be transitory as businesses and consumers adapt and adjust. Such perspective will help you stay the course during this bear market, and even be able to take advantage of others’ shortsightedness.
Any opinions are those of the author and not necessarily those of Raymond James. Expressions of opinion are as of this date and are subject to change without notice. There is no guarantee that these statements, opinions or forecasts provided herein will prove to be correct. This material is being provided for informational purposes only and is not a complete description, not is it a recommendation. Investing involves risk and you may incur a profit or loss regardless of strategy selected. Past performance is not indicative of future results.
