Is A Bear Market Your Trash or Treasure?

Silhouette of a bear over a graph that is trending down. A facepalming man in a suit is standing next to the graph.

I have always tried to teach my three girls that one man’s trash is another’s treasure. The saying essentially subscribes to the idea that something that’s useless to one person could be highly valuable to someone else. Sophie reminded me of this a few weeks ago when she came upon a garage sale as she was driving home from some school shopping as she prepared for the next chapter of life . . . college. She stopped at the sale and was amazed to find an almost-new North Face backpack being sold for a song and knew it would be perfect for her freshman year this fall. She couldn’t believe her good luck – and was surprised someone would get rid of something that awesome, so cheaply.

I shrugged and suggested that not everyone values the same things in the same way. I told her she was lucky to be on the receiving end of someone else’s “trash”. 

Being a finance guy, this naturally got me thinking about how this parallels to our current markets. And how a bear market in particular might be painful for someone yet profitable to another. Bear markets typically conjure up negative thoughts and negative investor sentiment. But for some, they actually pose an opportunity for future growth. With our time together this week I would like to dig in a bit about what this might look like in real life.

For starters, let’s define a bear market. A bear market is said to occur when prices in a market decline by more than 20%, often accompanied by declining economic prospects. Bear markets can be cyclical or longer-term. Cyclical bear markets often last for several weeks or a couple of months, while a longer-term one may last for several years or even decades.

The causes can vary, but in general a weak or slowing economy or other factors such as a pandemic, war, economic policies, or bursting market bubbles can play a role, too. Bear markets aren’t uncommon, with the last occurring in US stock markets at the outbreak of the COVID-19 pandemic in early 2020.

In contrast, a bull market is when stocks are rising – or expected to rise – over an extended period.

Today’s bear markets may be a potential boon for younger folks who are decades away from retirement. Following the age-old mantra “But Low, Sell High” means that depressed prices on Wall Street pose the opportunity to buy in at lower prices. By practicing the popular accumulation strategy of dollar cost averaging, you can buy and hold securities for the long-haul. Dollar cost averaging essentially attempts to smooth out volatility by buying shares of investments at regular periods to avoid trying to time the markets – which, frankly, is nearly impossible to do successfully. And while investing on autopilot can’t guarantee a positive result, it does take the emotion out of investing so you don’t make knee-jerk investment decisions.

Now for older, more established investors, a bear market is whole another story. If you experience a large drop in your assets closer to retirement, your ability to recover from the loss could take more time than you have. You see folks, unless you have a solid a retirement system that manages downside risk first, you may need to make some painful sacrifices to keep your retirement on track. For example, you might work a few years longer or perhaps transition into retirement by taking a part-time job for a few years. This can help reduce the amount of money you need to withdraw from your portfolio while it’s down.

Another possible tactic is to delay taking Social Security until age 70. Each year that you delay your benefits past your full retirement age gives you an increase of 8%. This translates to up to 32% more income from Social Security each year, which can make a big difference. And this increased amount is then guaranteed for the rest of your life.

On the plus side of the bear market for both younger and older investors is that yields on income-producing assets are rising. Depending on your unique situation, this could help soften the blow of other declining assets.

In the end, whether markets rebound quickly or slowly is unknown. Whether today’s bear market is your trash or your treasure, how you respond is up to you. Do you have a downside risk management system in place to better weather a bear market? You know, one that uses quantitative data to help put you in the highest probability of financial success?  If not, shouldn’t you? Think about it – and then take action on it!

And as always – be vigilant and stay alert, because you deserve more!

Have a great week.

Jeff Cutter, CPA/PFS is President of Cutter Financial Group, LLC, an SEC Registered Investment Advisor with offices in Falmouth, Duxbury, and Mansfield, MA. Insurance offered through its affiliate, CutterInsure, Inc. We do not offer tax or legal advice. Jeff can be reached at This information is intended to provide general information. It is not intended to offer or deliver investment advice in any way. Information regarding investment services is provided solely to gain a better understanding of the subject of the article. Different types of investments involve varying degrees of risk, including the potential for loss. Therefore, it should not be assumed that future performance of any specific investment or investment strategy will be profitable. Insurance product guarantees are backed by the financial strength and claims-paying ability of the issuing company. Market data and other cited or linked-to content is based on generally available information and is believed to be reliable. Cutter Financial does not guarantee the performance of any investment or the accuracy of the information contained in this article. Cutter Financial will provide all prospective clients with a copy of Cutter Financial’s Form ADV 2A, Appendix 1, applicable Form ADV 2Bs and Form CRS as well as the firm privacy policy. Please contact us to request a free copy via .pdf or hardcopy.