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Just In Time for Christmas, a (Teddy) Bear

Finally, he has arrived!

But it’s not Santa who arrived a bit early for Christmas, it is Teddy.

After years of patient predicting, the long anticipated bear market is here, and just in time for Christmas. On Monday, the S&P 500 fell 2.71%, or almost 66 points, closing at 2,351. That was enough to send the S&P 500 index into a bear market, down more than 20% from its September intraday high of 2,941 points. The Dow closed at 21,792, off 653 points for its worst Christmas Eve drop, ever. If that isn’t merry enough, this month is on track to be the worst December for US stocks since 1931.

Ho, ho, ho…so how much lower will the market go?

If history is any indication, a lot lower. The average bear market bottoms out at around a 36% drop. The Dow’s September high was 26,657, so a 36% drop would mean an eventual drop to 17,060. That would mean the Dow may have another 4,731 points to go. Of course, that’s just if this bear market is average. No one knows if this bear will be milder or meaner than average.

So, what should KFG clients do!? Nothing. Should you even care? Probably not.

We’ve been preparing for the arrival of this bear for a long time. Our bear traps are set, our guns are loaded, and we have a fresh supply of bear spray. In investor terms that means our retirees have one to two year of cash reserves in place, our average portfolio has less than 20% in the US stock market, and our alternative investments are working to cushion the drop in our stocks. If this bear wants a meal, he will need to go looking elsewhere for investors who are far less prepared.

Our intention is to make a teddy bear out of this little guy. So, breathe easy and enjoy your holiday.

Merry Christmas!

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