I came of age in the 1990s. I went to High School in Japan in 1991, which was the top of the their bull market. I went to Hong Kong in 1998 during the Asian Financial Crisis, I got my first job in finance in 2000 at the top of the dot com bubble, I got my first fund in 2006 just as the housing crisis was kicking off. In all of these crisis at least 50% of the people I worked with lost their jobs. I made finding and avoiding bear markets my number one focus. Of course just as I thought I worked how to do this, the US began the most epic bull market of all time. Probably the best graph to show this is the performance of the S&P 500 relative to bonds.
Or another way to put this is equities kept getting more expensive even as bonds got cheaper.
I had originally put this divergence down to governments choosing “pro-labour” policies. But recent price action is making me think this could have also been driven by the AI boom. Now here is a wealth warning. Back in 2007, I ran an emerging market fund, which was shooting the lights out. I knew the US had some housing market weakness, and at the time I thought that would mean the Fed would cut rates, dollar would weaken, and emerging market would be fine - the so called “divergence trade”. I realised in late 2007, this was incredibly stupid, and cut the book just before emerging markets went cliff diving. When the US has a problem, everyone has a problem.
After that, I was able to pick out the steel and iron ore bear market, the shale oil bear market, and the Chinese tech bear market, and I guess the more recent bear market in bonds. But the underlying trend in stocks has been up. Unless you have been foolish enough to invest in Chinese stocks, most people have not seen a bear market.
Here are my basic guidelines to surviving a bear market:
