Bear Market Thoughts

The S&P 500 is now in official bear market territory.

This is hard on stock investors, even veterans, even ones like us who follow a systematic program. If you’re feeling queasy, you’re not alone.

Sometimes it helps to go through common worries that fellow investors report, to see for yourself that you’re not alone. The following are thoughts I recently received from subscribers:

  • I knew this was coming. I just knew it. Why didn’t I get out in January?
  • I can’t believe I did this to my family. What will become of them now that we’ve lost so much?
  • What if the market fails to recover before it’s time for my financial goal? I need to send somebody to college, or build a home, or retire, etc.
  • We should hedge. If only we’d bought a -2x fund in January instead of continuing these plans.
  • The quarterly price signals are obviously inaccurate. The signals should be generated by moving averages, or sentiment, or something else.

Some of this might ring familiar.

You know how I know? Because I’ve been at this a long time, in public, and I receive people’s thoughts through all market phases. Everything you read above I received in similar form in past down cycles. In every recovery that followed, I received frustration from people who failed to buy or hold during the bargain phase. As with market levels, emotions follow a cycle.

If you’re feeling bad about the bear market, you’re normal. If your mind tricks you into thinking you knew this one was coming, you’re normal. If you’re rational enough to overcome your gut feelings and stick with what’s proven, you’re unusual. I’m betting on the latter.

Courage is not the absence of fear, it’s doing what needs to be done despite the crushing sensation of fear.



The following is a collection of edited replies to subscribers, which I thought you would like to see as well.


This bear market is the real deal, and it’s hard on a lot of people, especially after years of excellent gains. The feeling that it’s all draining away is a rough one.

The good news is that it’s not all draining away. It will come back. We’re going to be able to buy on the cheap in our July signal, and I do think that inflation is stabilizing and will taper over the rest of the year. We will one day look back on these cheap prices with envy. The level of opportunity is not always this high, as we know.

As for hedging in the plans, my backtesting shows that in most time frames it reduces performance. It’s hard to believe this when looking back over six months in which it would have helped, but it’s true. If instead of just selling at sell signals, the plans hedged, it would degrade performance because the market usually rises and holding something that declines during that rise harms performance.


Yes, it does feel good to buy into weak prices. I’m a fan of any rational action that soothes emotion. I hope the Twinvest idea is a help to you as well, if not by the letter at least in spirit: buy more as the price goes down, less as it rises.

I agree with you that a more aggressive Fed would bring a silver lining in that people couldn’t say it’s being soft on inflation, and maybe more aggression would speed up this inflation-slaying project.

Your comment about preferring the market on its way back up made me smile. Right! I hear you, and I know we all want that at some point, and I’ll grant that sooner would be better than later. Maybe it will happen, my friend. When it does, you’ll be better positioned than most, thanks to maintaining the right mindset.


I do not believe that anybody knew that the market was heading into this crash back in January. Of course half of the commentators said so—there’s always half saying so. Stopped clocks being coincidentally right don’t count.

If you track your own feelings about the market systematically, grading each one, you are likely to find that you’re wrong half the time. It’s the track record of the most seasoned pros. Almost nobody escapes it over long periods honestly tracked.

Consider your circuit breaker idea.

Where would you set the stop loss? Have the plans go entirely to cash at what level of decline for the stock fund? If -10%, then you would be going to cash nearly every quarter in the leveraged plans. So, then, -20%? Now, you’re going to go to cash at a significant loss.

In these and other cases, how do you determine when to get back in? If you’re like most chartists, it would be when the market has already headed substantially higher and built upward momentum, which they claim to be able to “clearly see” on charts. If so, however, you will have locked in the circuit breaker losses. Repeating a process of locking in losses is no way to win at this.

Plot this out and you’ll find that such a plan would greatly trail the market over time, and trail our plans by an even bigger margin.

The challenge when devising any long-term, rules-based stock investing system is keeping enough cash in the stock market to stand a chance against a 100% allocation to SPY. Anything that bails to cash at the first sign of downdraft is a goner. Anything that hedges is twice as far gone.



Finally, something to cheer you up, you buyer and/or holder, you.

Today’s op-ed by Mark Hulbert at MarketWatch is titled:

Those who buy stocks the day the S&P 500 enters a bear market have made an average of 22.7% in 12 months

The headline says it all, but there’s more:

“If you were eager to buy stocks at the beginning of the year, when the S&P 500 was 20% higher, why aren’t you even more eager now? … So long as you believe that the stock market will eventually go back up and surpass its January highs, however, purchases made now will show a bigger profit, and sooner, than the market itself.”

Yes, we believe this and so do our automated plans.

They believe it so thoroughly, in fact—if following rules based on historical truths can even be called a belief—that they react to lower prices with an automatic purchase.

The market rises twice as often as it falls, through any and all news. Now that it’s been falling for a while, it’s closer to its next rising phase. We can’t know when it will come, just that it will come, and that’s enough.

As always, I’m available by email with a simple reply, and the subscriber site is lively with discussion.

Have a good day!

Yours very truly,

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  1. Steve
    Posted June 16, 2022 at 10:40 am | Permalink

    I am an engineer and through no fault of my parents, a rancher too. Growing up in eastern Colorado in the 1950’s, John Wayne was someone we looked up to. So for the cowboys and cowgirls among us, here is one of John Wayne’s lines:

    “Courage is being scared to death and saddling up anyway.” Something maybe to keep in mind.

    It is darn hard sometimes to stay on a trail that “looks” to be headed in the wrong direction, especially when a terrible storm or circumstance challenges our sense of direction. We start feeling uncomfortable or even afraid, and second guess ourselves. But with a a little grit and determination, a good map, a compass and a plan we can stay on our planned route and eventually come to our destination.

    We have a map, compass and a plan. Anyone in the investment world has grit. So saddle up. Hang in there. It will all work out. We will get there.

  2. Dean Thomas
    Posted June 15, 2022 at 11:16 pm | Permalink

    I have been using all of my current dividend monies once a month and buying more shares of QYLD and TQQQ. In July I will reinvest all of my dividend money in the same place and take full advantage of these lower prices. I did not do this in 2007 because I did not know about Jason’s letter till 2008. I missed a great opportunity back then and will not make that mistake again.

  3. Matt Lester
    Posted June 15, 2022 at 10:38 pm | Permalink


    I’ve been involved in markets a bit over 35 years. I believe your SIG plans are the best overall plans around, given that we never know how the future will unfold.

    The great thing about the quarterly rebalancing is that you only have to muster up the courage to act once a quarter. I’ve found that the fewer decisions I make, the better I do emotionally. Personally, I run the 9Sig plan and also maintain a separate “doomsday” account–basically a bunch of money in 2-year Treasuries. Running out of investable cash wears on my emotions. As long as I have ammo to keep rebalancing (now buying at low prices), the correction doesn’t wear on me quite as much–so, once my 9Sig account runs out of ammo, I’ll move some money over from the doomsday account.

    I know that seems sort of silly, but anything that helps maintain emotional balance is valuable. Of course it’s no fun right now, but I had plenty of fun in the 2nd half of 2020 and all of 2021.

    Hang in there. You’re doing great and your empathy for your subscribers is much appreciated.


    • Anonymous
      Posted June 15, 2022 at 10:56 pm | Permalink

      One suggestion that may prove to be objectively reassuring: using some backtesting to track the performance of the “suggested alternatives”. I regularly see the performance of the Sig portfolios marked against the market’s returns; how about creating two other “comparatives”: just an idea but A) the “Go to Cash at X% decline, followed by ‘re-entry given a cross of the 30 day moving average above the 200 day moving average (when both are rising)” and B) the purchase of the -2x bear fund upon a 10% decline, with its sale on the first to occur of x) a 20% decline* or y) a recovery above the point of the triggering decline. (* The sale at 20% decline acknowledges the fact that 12mos after a 20% decline the market is (historically) up by 22%ish). Subscribers who could see the continuing and historical divergence between the Sigs and the ‘comparatives’ would likely feel more emboldened by the declines. (Irish courage, as it were!)

      • Posted June 17, 2022 at 2:10 pm | Permalink

        In the site redesign underway, I plan to present performance from different angles. As part of that effort, I’ll collect in one place comparisons to other market approaches. It’s a good idea.

    • Posted June 17, 2022 at 2:07 pm | Permalink

      Thank you, Matt.

      I appreciate your confirmation that the Sig approach is the best you’ve found. Same here!

      Your emotion and account management looks to me. I agree that anything that keeps emotions cool through a bear market is fine, as long as it doesn’t involve selling. Keep that buying power flowing into bargain prices.

      I’m happy to have you,

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