Back in March 2020 – the early days of the COVID-19 pandemic – I came to you with a message that probably surprised some of you…
The market had just dropped 30%… investors were panicking… but I said:
The economic slowdown from the coronavirus will be temporary… Corporate earnings will crater… People will lose their jobs… Economic growth will stall.
There is no doubt about that…
Remember the lessons of 2007–09. Please do not make long-term decisions based on short-term facts. And the fact is, while the economic and human fallouts from the coronavirus are very serious… they are temporary.
The bet I’m making with stacks of my own money is: We’ll either be at or have exceeded the old highs within 18 months.
And that’s what happened…
By December 2021 the S&P 500 had rallied from its March 2020 pandemic low all the way up to 4,800… It was a monster rally.
Just like in March 2020, we’ve watched the market take a beating over the last few months…
The S&P 500 is down 17% from its January high… bitcoin and crypto are down 55% and 56% from their all-time highs six months ago…
The best thing that you can do right now is exactly what I told you back then…
Buy more great assets on weakness… or do nothing at all.
Because just like 2020, the Great Recession in 2008, and the dot-com bust… the market will self-heal.
In fact, I believe we’ll see new highs next year. I know that sounds crazy. But I’ve been through this before.
We’ve Always Had Volatility
What we’re seeing now confirms my February prediction that we’re in a “cyclical” bear market.
Now, I don’t want you to fear a cyclical bear market. It’s much different than a “secular” bear market.
Secular markets are long-term “one-way” directional moves that generally last between 12 and 20 years.
Cyclical markets are shorter periods within secular markets. They generally last 6–18 months.
Right now, we’re experiencing a cyclical bear market within a long-term secular bull market.
I’ve seen these cycles play out numerous times over my 30 years in the markets.
For example, during the 1982–2000 secular bull market, we experienced three cyclical bear markets that lasted an average of 11 months.
The average peak-to-valley drop during those cyclical bear markets was 25%. However, the average recovery time to new highs was just 11 months.
In my opinion, the period most similar to now is 1994.
Just like in 2021, we saw a huge rally in stocks and bonds in 1993. They were up 17% and 34%, respectively.
Then surging inflation spooked the Fed… and stock and bond prices crashed .
It was a nightmare.
Amazing companies – from Microsoft to Oracle, Walmart, and Cisco – got slammed. They were down 27%, 30%, 43%, and 54% respectively.
In my opinion, that 1-year period was the single-best buying opportunity of the entire decade. It was when the risk was lowest, and the reward was highest.
From 1994–2000, we saw companies like Oracle, Microsoft, and Cisco rise 3,500%, 2,662%, and 7,770%, respectively
But it wasn’t a straight line up. There were a lot of painful bumps along the way.
I know it’s uncomfortable to go through a bear market, even if it’s short term. But you must prepare yourself for further weakness.
We may bounce in and out of bear market territory (a plunge of 20% or more) for the remainder of the year… but it’s all just a dip in what I still believe is a “secular” long-term bull market… one that should last until about 2028.
The best way I know of to make money in a market like this is to do one of two things…
Do nothing and let the volatility run its course.
Buy quality stocks on weakness and hold them for the long term.
One easy way to achieve No. 2 that is to watch the S&P 500 and Nasdaq…
If you see them drop to their 200-week moving averages (about 3,470 and 10,696, respectively) consider buying the SPDR S&P 500 ETF Trust (SPY) and the Invesco QQQ Trust (QQQ) to take advantage.
Of course, if you subscribe to any of my paid newsletters, we’ll be recommending plenty of great companies as they become cheaper in price (see the P.S. below for more details).
Friends, I know this is a hard message to swallow when your portfolio is in the red… but that’s the mindset you need right now if you want to come out of this bear market richer.
You need to sit tight… or look for high-quality blue-chip companies that you can buy on weakness.
That’s how you make a short-term bear market occurring within a long-term bull market work for you rather than against you.
So remember, we’ve been here before. They key is to not panic sell. Selling into weakness is the worst thing you can do for your long-term portfolio… and your financial future.
Be rational. Don’t panic. And let time do the heavy lifting.
Let the Game Come to You!
P.S. As I mentioned above, my team and I are always on the lookout for long-term investments with life-changing potential…
And right now, I believe we’ll see some of the fastest gains in crypto if we invest in the foundational altcoins and companies leading NFT and metaverse development… especially with the low crypto prices we’re seeing today.
To learn how to get started, click here… you’ll even get a free pick (no strings attached) that could potentially 10x your money when this trend takes off.
(Once you’ve subscribed, you’ll also get immediate access to a portfolio of diverse, actionable investments you can make right now.)