3 Lessons From the 2020 Bear Market

On the one-year anniversary of the end of the Covid-19 bear market, we highlight some key takeaways.

3 Lessons from the Covid-19 Bear Market The Covid-19 bear market ended just over a year ago, on March 23, 2020. Needless to say, the twelve months that followed delivered no shortage of economic and political twists and turns. But for equity investors who kept a steady hand and a long-term mindset, it also delivered a +75% return on the S&P 500 (from March 23, 2020 to March 23, 2021).1 Reflecting on the last twelve months, I find it useful to think about lessons and takeaways we can learn from, so we can apply them to our investment approach going forward. Here are my top three. Lesson #1: Work with a Trusted Advisor to Help Keep You on Track The world was awash in uncertainty this time last year, and no one knew what the future would hold. Markets were frazzled, folks were scared, and no one really understood any details about the nature of the pandemic. But it was also as important as ever, in my view, to stay invested and keep a steady hand. Instead of Timing the Market, Focus on Your Long-Term Financial Goals! Amongst the many lessons that can be learned from a bear market, the most important lesson is to not time it. When the pandemic started last year around this time, investors were questioning how to plan out their financial future. Still to this day, there are still reasons to be uncertain and cautious in your decision-making process. There have always been factors that heavily shifted the market in the past, but over time there has also been a positive return. So, instead of focusing on short-term choices, I recommend sticking to the fundamentals and maintaining a diversified portfolio. To help you do this, I am offering all readers our just-released Stock Market Outlook report. This report contains some of our key forecasts to consider such as: S&P 500 earnings growth Outlook for underlying U.S. economy? U.S. returns expectations for 2021 What produces 2021 optimism? Is it time to buy U.S. stocks? Update on U.S. fiscal stimulus And much more If you have $500,000 or more to invest and want to learn more about these forecasts, click on the link below to get your free report today! IT'S FREE. Download the Just-Released April 2021 Stock Market Outlook2 It helps to have a trusted advisor who communicates frequently and clearly. At Zacks, we publish over 300 individual investment thought-leadership communications, so we can stay in touch with our readers and provide constant insights into our decision-making process. Even with frequent communication, some investors still want to make adjustments during uncertain times, for peace of mind. We get that. That's why we offer a flexible range of investment solutions to give you more control, instead of simply offering you a sleeve of portfolios based only on your risk tolerance. Not only do we give investors options, but we also offer the ability to customize portfolios to include or exclude specific industries. Finally, it helps investors to know that decisions are being made using a trusted source of investment research, in our case Zacks Investment Research. Having a robust decision-making process guided by research is critical during a time when it's easy to give into subjectivity. Lesson #2: Diversification Will Help You Capture Short-Term Trends Once the rally off the bear market bottom gained steam, many investors were scrambling to invest in growth trends – eCommerce, remote work, digital everything – hoping to capture some of the uptrends. Then later in the fall, the hot trade was favoring value over growth. After that, it was small over large. My point here is that leadership changes hands often and quickly in the equity markets, and investors who try to rotate over and over will often latch onto a trend too late – after many of the gains have already been priced-in. As many long-time readers know, I do not advocate short-term market timing, and I definitely do not advocate chasing trends and shifting your asset allocation based on market speculation. That's where diversification comes in – by owning a diversified set of stocks across sector, region, style, and size, you do not need to worry about shifting your portfolio around to capture the latest outperformer. A diversified portfolio will likely already have exposure to it. Lesson #3: Keep Steely Nerves During a Crisis I already mentioned keeping steely nerves during a crisis, but it's so important that it's worth referencing again. Stocks fell -34% from February 12 to March 23 – a record sharp drop that accompanied a very scary time. Many investors fled the market. We know today that selling stocks on the way down was a wrong decision. The market's rally off the bottom continues today and has been among the strongest in history. But we've seen this time and again throughout history – since World War II, there have been six bear markets over -30%, and every single time the S&P 500 index rallied strongly off the bottom, with an average return of +40%. The potentially good news for investors: the second year of the bull market is also strong historically, up an average of +16.9%. Keep your steady hand. Bottom Line for Investors The past year has been extraordinary, but not necessarily in a good way. There are many lessons within politics, economics, and public health that we are still learning and will continue learning for years. When it comes to investing, there are many lessons we can take away from the past year, but I think the three above mattered most and can be applied over the long term. Working with a trusted advisor, keeping a diversified portfolio, and staying calm during a market crisis are all steps you can take to better plan your financial future. One way to stay calm during times like these is to focus on key data points and economic indicators that could positively impact your investments long-term. To help guide you, I am offering all readers our Just-Released April 2021 Stock Market Outlook Report. This report looks at several factors that are producing optimism right now and contains some of our key forecasts to consider such as: S&P 500 earnings growth Outlook for underlying U.S. economy? U.S. returns expectations for 2021 What produces 2021 optimism? Is it time to buy U.S. stocks? Update on U.S. fiscal stimulus And much more If you have $500,000 or more to invest and want to learn more about these forecasts, click on the link below to get your free report today! FREE Download – Zacks' April 2021 Stock Market Outlook Report3 ABOUT ZACKS INVESTMENT MANAGEMENT Born from Research – Built for Performance Zacks Investment Management was born out of one of the country's largest providers of independent research, Zacks Investment Research. Our independent research capabilities from our parent company truly distinguish us from other wealth management firms - our strategies are derived from research and innovation, including the proprietary Zacks Rank stock selection model, earnings surprise and estimate revision factors. At Zacks Investment Management, we work with clients with $500,000 or more to invest, and we use this independent research, 35+ years of investment management experience, and tools we've developed to design customized investment portfolios based on each client's individual needs. The end result is investment management that is research driven, results oriented and client focused. Ready to get serious about pursuing your financial goals? Call 1-800-701-9830 today, or schedule a time with a Zacks Wealth Advisor. © Zacks Investment Management  |  Privacy Policy 1 Kiplinger. March 23, 2021. 2 Zacks Investment Management reserves the right to amend the terms or rescind the free Stock Market Outlook offer at any time and for any reason at its discretion. 3 Zacks Investment Management reserves the right to amend the terms or rescind the free Stock Market Outlook offer at any time and for any reason at its discretion. Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. Zacks Investment Management, Inc. is a wholly-owned subsidiary of Zacks Investment Research. Zacks Investment Management is an independent Registered Investment Advisory firm and acts as an investment manager for individuals and institutions. 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