50+ Lifestyles

Are We in a Bear Market?

By Richard J. Schillig, CLU, ChFC, LUTCF
Independent Insurance and Financial Advisor

We are hearing every day the stock market is crashing and retirees are losing substantially. The coronavirus is continuing the blame causing major fear in the financial markets with the “Bear Market” upon us. Exactly what is a bear market? A bear market is a condition in which securities prices fall 20% or more from recent highs amid widespread pessimism and negative investor sentiment. Typically bear markets are associated with declines in an overall market or index like the S&P 500. But individual securities or commodities can be considered to be in a bear market if they experience a decline of 20% or more over a sustained period of time – typically two months or more.

The term ‘bear market’ is the opposite of a ‘bull market’ or market where prices for securities are rising or are expected to rise. The bear market phenomenon gets its name from the way in which a bear attacks its prey – swiping its paws downward. This is why markets with falling stock prices are called bear markets. Just like the bull market is named after the way in which the bull attacks by thrusting its horn up into the air.

The causes of a bear market often vary, but in general, a weak or slowing or sluggish economy will bring with it a bear market. Normally the signs of a weak or slowing economy are typically low emplyment, low disposable income, weak productivity and a drop in busness profits. In addition any interruption by the government in the economy can also trigger a bear market.

The S&P 500 closed January 4 at 4,793. As of the time of this writing (March 18 10 AM) S&P at 4,416 – not yet a 20% decline. This is same year-to-date result with other stock market indicators – Dow Jones Industrial Average, Nasdaq, Nasdaq 100. Yes we are not quite in a bear market. Financial websites continue to scream of disasters with ‘What your stock broker is not telling you’ or ‘$4 trillion gone in less than 10 days.’ How do you protect your retirement or other savings from these ravages?

Our strategy is to use the index annuity as a hedge against losses. Index annuities combine the best feature of the life insurance industry’s fixed annuity (guarantees) with the best feature of the industry’s variable annuity (potential for appreciation). These financial products allow investors to share in the growth of the stock market. But these financial products do not allow investors to share in stock market downsides or losses. Once interest and gains are posted to the account that value then becomes guaranteed without the risk of downturns, Consequently the account value will either remain the same (with market declines) or gain (with market gains).That’s why I can say with all confidence “my clients have not lost money.” And that remains the terrific value of the fixed index annuity.

There are pros and cons to any investment including the fixed index annuity. Please contact us to determine the appropriateness of this investment option for your situation.

During the month of April we continue our monthly Community Meetings provding a wealth of information on the options for Medicare.