Markets in a Minute

Visualizing 60 Years of Stock Market Cycles

Published

4 months ago

December 21, 2023

Dorothy Neufeld

Visualizing 60 Years of Stock Market Cycles

Today’s stock market is nothing short of unusual.

The S&P 500 has climbed over 24% to date against a backdrop of strong economic growth and rising interest rates. Despite these factors, the unemployment rate has remained low at 3.7% as of November, and inflation has moderated.

To give some context on the current stock market cycle, this graphic shows 60 years of bull and bear markets, with data from First Trust.

Bulls and Bears Over History

A bear market takes place when a stock market index declines 20% from its peak.

Once stocks fully recover and exceed this peak, it enters a bull market. This can happen over the course of months or years. But as the table below shows, bear markets have been much shorter than bull markets since 1962:

Market	Average Return*	Average Duration
📈 Bull Market	+151.6%	51.0 Months
📉 Bear Market	-34.2%	11.1 Months

*As of September 29, 2022.

The longest bear markets over this period were in the early 1970s and 1980s, both lasting roughly 20 months. In both cases, high inflation led the Fed to tighten monetary policy, triggering each recession. In 1974, the S&P plummeted 48.2% from its peak, in one of the sharpest declines since WWII.

On the other hand, the longest bull market took place through the 1990s amid a roaring U.S. economy. Lasting over 12 years, it reached an apex during the Dotcom boom. Over the course of the bull market, the S&P 500 advanced 582.1%.

After the 2008 Global Financial Crisis, the stock market witnessed another expansive bull run, this time lasting 11 years. Ultra-low interest rates and the outperformance of big tech in particular defined the cycle.

In many cases, stock market peaks happen before a recession begins. Consider how in 2007, the S&P 500 hit a high in October before the recession officially began in December. Similarly, the S&P 500 peaked in September 2000, six months before the 2001 recession officially started.

How Can Investors Prepare for a Bear Market?

No one knows when a bear market will begin, but there are strategies that investors can use to build a more resilient portfolio.

Diversifying across sectors is one approach. Consider how cyclical sectors, such as tech and real estate tend to rise when the market is on the upswing. By contrast, when the market takes a turn, traditionally more defensive sectors like consumer staples outperform.

Asset class diversification is another tactic. Including bonds in a portfolio typically reduces risk given their stable cash flows and historically low correlation to stocks. International stocks also have a lower correlation to U.S. equities which means that when U.S. stocks are down, these types of assets can help buffer the loss.

The good news is that the S&P 500 has seen +11.5% average historical returns since 1928. Overall, the majority of stock market cycles take place in bull territory both in terms of net return appreciation and length of time by a wide margin.

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Markets in a Minute

The Top 5 Reasons Clients Fire a Financial Advisor

Firing an advisor is often driven by more than cost and performance factors. Here are the top reasons clients ‘break up’ with their advisors.

Published

2 weeks ago

April 15, 2024

Dorothy Neufeld

This circle graphic shows the top reasons for firing a financial advisor.

The Top 5 Reasons Clients Fire a Financial Advisor

What drives investors to fire a financial advisor?

From saving for a down payment to planning for retirement, clients turn to advisors to guide them through life’s complex financial decisions. However, many of the key reasons for firing a financial advisor stem from emotional factors, and go beyond purely financial motivations.

We partnered with Morningstar to show the top reasons clients fire an advisor to provide insight on what’s driving investor behavior.

What Drives Firing Decisions?

Here are the top reasons clients terminated their advisor, based on a survey of 184 respondents:

Reason for Firing	% of Respondents Citing This Reason	Type of Motivation
Quality of financial advice and services	32%	Emotion-based reason
Quality of relationship	21%	Emotion-based reason
Cost of services	17%	Financial-based reason
Return performance	11%	Financial-based reason
Comfort handling financial issues on their own	10%	Emotion-based reason

Numbers may not total 100 due to rounding. Respondents could select more than one answer.

While firing an advisor is rare, many of the primary drivers behind firing decisions are also emotionally driven.

Often, advisors were fired due to the quality of the relationship. In many cases, this was due to an advisor not dedicating enough time to fully grasp their personal financial goals. Additionally, wealthier, and more financially literate clients are more likely to fire their advisors—highlighting the importance of understanding the client.

Key Takeaways

Given these driving factors, here are five ways that advisors can build a lasting relationship through recognizing their clients’ emotional needs:

Understand your clients’ deeper goals
Reach out proactively
Act as a financial coach
Keep clients updated
Conduct goal-setting exercises on a regular basis

By communicating their value and setting expectations early, advisors can help prevent setbacks in their practice by adeptly recognizing the emotional motivators of their clients.

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Markets in a Minute

The Top 5 Reasons Clients Hire a Financial Advisor

Here are the most common drivers for hiring a financial advisor, revealing that investor motivations go beyond just financial factors.

Published

2 weeks ago

April 15, 2024

Dorothy Neufeld

This circle graphic shows the top reasons for hiring a financial advisor.

The Top 5 Reasons Clients Hire a Financial Advisor

What drives investors to hire a financial advisor?

From saving for a down payment to planning for retirement, clients turn to advisors to guide them through life’s complex financial decisions. However, many of the key reasons for hiring a financial advisor stem from emotional factors, and go beyond purely financial motivations.

We partnered with Morningstar to show the top reasons clients hire a financial advisor to provide insight on what’s driving investor behavior.

What Drives Hiring Decisions?

Here are the most common reasons for hiring an advisor, based on a survey of 312 respondents.

Reason for Hiring	% of Respondents Citing This Reason	Type of Motivation
Specific goals or needs	32%	Financial-based reason
Discomfort handling finances	32%	Emotion-based reason
Behavioral coaching	17%	Emotion-based reason
Recommended by family or friends	12%	Emotion-based reason
Quality of relationship	10%	Emotion-based reason

Numbers may not total 100 due to rounding. Respondents could select more than one answer.

While financial factors played an important role in hiring decisions, emotional reasons made up the largest share of total responses.

This illustrates that clients place a high degree of importance on reaching specific goals or needs, and how an advisor communicates with them. Furthermore, clients seek out advisors for behavioral coaching to help them make informed decisions while staying the course.

Key Takeaways

With this in mind, here are five ways advisors can provide value to their clients and grow their practice:

Address clients’ emotional needs early on
Demonstrate how you can offer support
Use ordinary language
Provide education to help clients stay on track
Acknowledge that these are issues we all face

By addressing emotional factors, advisors can more effectively help clients’ navigate intricate financial decisions and avoid common behavioral mistakes.

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