These long-term bull markets occur when the economy is generally doing well. We will call these periods of economic prosperity "Sailing” markets because the economic and market winds drive your investment returns. Volatility tends to be historically low creating smoother investing seas and easy travel. When the winds of the economy are blowing we need to open our sails as high and wide as possible in an effort to capture as much of the available economic wind as possible and enjoy the ride.

The long-term bear markets tend to occur when the economy is struggling and transitioning to a new economic cycle. As you can see, these secular bear markets which we will call "Rowing” markets can last for a long time. This is a time when "Sailing” strategies tend not to do well. In order to continue making progress toward the destination when the economic winds are no longer blowing and the investment waters are choppy, we need to get out the oars and start rowing towards the goal. During these periods, the objective becomes less about relative performance to a benchmark and more about risk management/reduction. Focusing on risk management/reduction during a "rowing” market may allow you to reduce or avoid major losses during downturns so that you can be in a better position to take advantage of the upturns that typically follow resulting in making progress towards your goals even in a difficult economic period/market.

If we look at where we are now, we are 11 years into the most recent secular bear market. This recent secular bear market is two years shy of the shortest of the previous bear markets and nearly five years less than the longest. I believe the reason investors have suffered substantial losses in their investment portfolios and are frustrated when they see their accounts have not grown as they hoped over this time is because they are primarily following the "Sailing” strategies that worked well in the 80's and 90's that do not work well in these more difficult economic times. The question you may ask yourself is where do we go from here and how to we navigate these volatile markets so that we can move closer to our goals?

Understaing how these secular market cycles work and why they occur can give you the confidence to select an appropriate investment strategy that would be designed to navigate these volatile periods. Consider the preivious two secular bear markets which occured between 1966-1982 (see chart) and 1929-1942 (see chart). During both of these periods, there were plenty of cyclical (short-term) bull markets within the secular bear market. Employing strategies designed to avoid major losses and conservative allocations during these markets can better position investors to build wealth while traditional buy and hold investors continue to be frustrated.

To help navigate these volatile markets, I use various tools such as demographic trend analysis, predicatable consumer spending patterns, and other Macro-Economic tools along with shorter term indicators such as technical analysis and economic leading indicators to make an educated forecast on where the economy and financial markets are headed. This forecast then determines which Asset Allocation approach(es) that will be utilized to design your investment strategy.