WHAT IS IT?
When a market index (like the S&P 500) falls 20% or more from its peak.
HOW OFTEN?
On average, a bear market occurs every 56 months.
HOW LONG?
On average, a bear market lasts 9.6 months.
WHAT IS IT?
When the market has risen 20% or more above its near-term lows.
HOW OFTEN?
Bull markets have occurred for 78% of the past 91 years.
HOW LONG?
The average length of a bull market is 3.8 years with the longest being the 11-year run from 2009 to 2020.
How we prepare our businesses for another potential bear market can mean the difference between thriving or struggling. Let’s revisit some keys to maintaining a financially viable company when the economy is slowing.
Have a contingency plan to maintain cash reserves. You may aim to save 10% of your business cash in a high-yield savings account for unforeseen cash crunches. This way, you can avoid relying on lines of credit from your bank with high interest rates.
Have backup plans in case a critical supplier goes offline, faces unexpected delays, or increases prices excessively, which would impact your profits. Securing secondary options for critical supply chain components is playing it smart.
Although you may have plans to expand your product or service offerings or increase your geographic market reach, consider whether the return on investment will warrant the capital needed to make the growth a success. It may make sense to move forward or to wait out the economic slowdown. Moving too fast right now could over-extend your operation and unforeseen circumstances may catch you off guard. Keep your eye on outside factors that are out of your control (inflation, unforeseen lockdowns, shipping delays, unexpected rising costs, cooling market sentiment, etc.).
It might sound counter-intuitive to raise your prices in a slowing economy, but you’ll need to fight inflation and cover the increasing costs of goods sold that are shrinking your gross margins.
Consider bundling products together to help justify a price increase in your customers’ eyes. Optimizing your average order value will raise transaction amounts.
Be sure to cut excess expenses. That might mean targeting your marketing to your top-performing channels and tabling the rest for the foreseeable future.
Perhaps you’ll need to manage your business with fewer of the employee perks, like free lunches and keep tabs on travel, meetings, etc.
When markets take a tumble, it’s natural to feel uneasy. But keep these tips in mind to navigate an extended decline.
When markets drop, it can be tempting to jump out until asset values stabilize or start climbing. But this can lead to costly mistakes that lock in permanent capital loss. To optimize your returns, time in the market is critical. Avoid making knee-jerk reactions.
If you’re counting on your assets to meet a short-term goal or plan to retire in the next few years, it might make sense to dial back the risk in your portfolio. Investors with longer time horizons can usually withstand some market volatility. But if you have immediate or short-term needs, a more conservative asset mix may be needed.
If you aren’t sure what to do, schedule a meeting with your financial professional to review your portfolio and various investment options that may help limit the impact a market downturn could have on your short and long-term goals.