The bear market is over, long live the bull market!

There is something arbitrary and reassuring about the anointing of bull and bear markets.

Focusing on a single point in time snapshot of a 20% increase or decrease in a market index does not give the full picture of the economy and its impact on consumers.

But like the turmoil of the sea before the storm and the calm after the worst has passed, there are good lessons for investors. Clear skies are often given to those who do not panic in the midst of clouds of chaos.

Recent bulls and bears (Yardeni Research data):
The longest bull market in history began in March 2009 after the Great Financial Crisis (GFC) bear market wrecked the system. The GFC bear lasted 517 days (October 9, 2007 to March 9, 2009) and caused a 56.8% decline in the S&P 500 Index. Sure, it was painful, but those who kept investing would soon enjoy an astounding 11-year run of stock prices.

The party finally came to an end in March 2020, when the pandemic wreaked havoc on our lives and the Corona bear market arrived.

To help thaw the frozen economy, Congress enacted a series of spending measures, while the Federal Reserve cut interest rates to zero and bought government bonds and mortgage-backed bonds.

The combination of these trillions of dollars that flowed into the system ended a COVID-19 bear that lasted just 33 days (Feb. fell 33.9%. index.

A new bull market emerged from the worst days of the pandemic and lasted until January 2022 (the tech sector peaked a few months earlier in November 2021).

As 2022 began, it was clear that the Federal Reserve planned to raise interest rates to keep inflation in check. Few expected the central bank to launch its most aggressive rate-hiking campaign since the early 1980s.

High inflation and rising interest rates were a detrimental combination that pushed stock (and bond) prices down through 2022, to what we now know is the low point of the S&P 500 index on October 12, 2022. The Fed’s bear market lasted for 282 days (1/3/2022 to 10/12/2022) and slashed the value of the S&P 500 by 25.4%.

Since October last year, there have been many predictions that high interest rates, coupled with still-high inflation, will continue the bear market and trigger a recession at some point in 2023.

Nevertheless, stock indices seemed to disappoint as many companies turned a profit, jobs continued to be created, and new innovations in the form of AI ignited the animal spirit. The bear market ended on June 8, when the S&P 500 index rose more than 20% from its January 2022 low.

There will be a lot to talk about in this new bull market, but in the short term we can expect the following: Some investors who have complained about the stock market and questioned its ability to recover will roll in in the towel.

Recent gains have come from a handful of mega-cap tech stocks (Alphabet, Amazon, Apple, Meta, Microsoft, Netflix, Nvidia, Tesla), and narrow gains make recent gains impossible. Some people will. maintained.

For some of these bears, the current rally in stocks may simply be a bearish trap, luring investors to buy stocks and face worse bears in the future. Some would say no.

The rest of us (also called rational long-term investors) will avoid the extremes and stick to well-diversified portfolios of index funds and exchange-traded funds.

Jill Schlesinger, CFP, is a business analyst for CBS News. She is a former options her trader and her CIO at investment advisory firm, and she welcomes comments and questions at askjill@jillonmoney.com. Check out her website www.jillonmoney.com.