Dealing with a bear market

We are in bearish territory again, just two years after the coronavirus bear that lasted just over a month (February 19, 2020 to March 23, 2020).

The Dow Jones fell below 30,000 on Thursday, June 16, after hitting an all-time high of 36,799 five months earlier on January 4, 2022. The S&P 500 index is down 23% since the start of the ‘year. The Nasdaq is down 32%.

This bear is different.

Inflation is soaring (8.6% year-on-year in May). The Federal Reserve is responding by raising its federal funds interest rate quite aggressively – including a 0.75 percentage point increase on Wednesday, June 15 – with further increases on the way.

If the Fed wanted to get investors’ attention, it succeeded. These are uncertain times…for many reasons.

This leaves us with this question: should investors react?

I’m sure you’ll agree that the answers will depend on the circumstances. Traders will be inside and outside the market; they can take advantage of increased volatility, including on the downside, assuming they know how to sell short or buy inverse ETFs (exchange-traded funds) that make money during market declines. (Note that inverse ETFs and short selling are advanced strategies that may be suitable for seasoned investors in particular cases, but are certainly not suitable for everyone. (Read “FINRA, SEC warn retail investors to invest in leveraged and inverse ETFs” at and “The Lowdown on Leveraged and Inverse Exchange-Traded Products” at

What about long-term investors? It depends on the horizon. Young 401(k) plan members have 30 or 40 years ahead of them. Their payroll deductions are buying shares of their 401(k) stock funds at prices far below where they were just six months ago.

Also consider this: Regardless of your horizon, if your company is making matching contributions into your 401(k), you’re ahead no matter what. If your match is $100 and your contribution is $100, you have invested $200. You would have to lose more than $100 in a market decline before you had a “loss” on your own $100 investment.

Who should be worried? Retirees who don’t have control over cash flow. By cash flow, I mean the dollars you need to take out of your investments to pay your living expenses.

A retiree with a 20-30 year horizon needs to focus on how the money is generated. If cash is generated from interest and dividends, a market decline will reduce the dollar value of holdings, but not cash flow.

On the other hand, while the investments do not produce income, the cash flows are generated by the sale of the assets. Retirees who sell investments to pay expenses risk running out of money in a prolonged bear market.

The best advice is to do your cash flow analysis, understand where your money will come from (income or capital) and structure your portfolio to prepare for falling markets AND rising inflation – all of this is doable, if you’re willing to do your homework.

What’s the bottom line? Markets come and go. It’s always wise to keep this in mind, especially if you want to retire one day.

For helpful tools, visit FINRA’s personal finance website ( Visit your library for one of my retirement books: “The Retirement Survival Guide”; “Management of retirement assets”; “Safe retirement”; or my latest book for lawyers, “The Discerning Investor”.

Julie Jason, JD, LLM, personal fund manager (Jackson, Grant of Stamford) and author, welcomes your questions/comments ([email protected]). His awards include the 2021 Clarion Award, symbolizing excellence in clear and concise communications. Her latest book, a curated collection of Julie’s columns, is “Retire Securely: Insights on Money Management From an Award-Winning Financial Columnist.” To hear Julie speak, visit

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