Another Rough Week for the Bull

Are we in a bear market? A few weeks ago I posed that question. This past week confirmed at least in my mind that we are in a bear market. We are very close to the official 20% decline line that is used by many to classify a drop as a bear market. Of course, today the market is closed. However, the futures markets are trading in other countries. The trading is absolutely horrible. IF the Dow Jones were to open right now, it would be down 400 to 500 points. That would put us in official bear market territory.

So, if you are invested in stocks and you want to reduce your risk, how should you go about doing that?

Please know that I am not suggesting that anyone sell their investments. I cannot give advice in these pages. I just hope that you found agreement with me months ago when I was writing about the risk in the markets and made the appropriate moves at that point.

I think that we are pretty close to a “temporary” bottom. Remember, bear markets don’t fall in a straight line. They go through periods of declines. They rebound for a period of time, then the selling and the declines resume. This happens over a period of time until one day the market has found a real bottom.

So, if you are looking to sell some of your holdings and reduce the risk in your portfolio, one method would be to use bear market rallies as an opportunity to make sells. As the market rallies, you might slowly sell some of your equity positions.

Remember, we still have not heard anything from the Fed in regards to a rate cut. I feel strongly that we will see the Fed move aggressively. To get the most bang for the buck, they could do a surprise rate cut. That should motivate the markets to rally and temporarily halt the selling.

Don’t forget, the problems that are causing this slide in the stock market are not gone. Unfortunately, they will probably worsen before they start to get better. So, know your risk and make sure that you have a game plan. Bear markets can be very brutal.

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