Be prepared in any market. Therefore, diversify broadly, asset allocate properly and use trailing stops. This way, you can play the market, regardless of bull or bear market concerns.
This is an unusual time for equity investors. The Russell 2000 index, the leading index for small cap stocks, traded down more than 20% from its recent high. This means we are officially in a small cap bear market. Meanwhile, large cap stocks, measured by the Nasdaq and the S&P 500 suffered a temporary correction but are still officially in a bull market.
So, what should smart investors do in a simultaneous bull and bear market? Do the same as usual: stick to a successful strategy that works. No one can accurately and consistently forecast bull and bear markets. Trying to time the markets does simply not work out in the long run.
Nothing outperforms stocks over the long time. We do not have a crystal ball and can not predict the future. The smart investor knows this and prepares for all different kind of scenarios. He builds a diversified portfolio of growth and value stocks, including large and small companies in domestic and international markets. You spread your investment over different asset classes from stocks and bonds over real estate, precious metals, commodities crypto and even cash, among others. And you set trailing stops to protect your your assets.
Long-term investors who can ignore short-term market fluctuations are generally well served by a buy-and-hold strategy. Market dips, small or big, are buying opportunities. History has shown this, all over again.
Sven Franssen