The S&P 500 came close to a bear market last week, with Thursday’s close bringing the market down just over 19%. A bull’s horns go up while a bear puts its head down to charge. So a bear market is a 20% or greater drop in an index. Stocks rallied on Friday, but not enough for a positive weekly return.
We could be looking at further drops in the weeks ahead, and possibly even a recession in the next 12-18 months. A recession is two consecutive quarters of negative growth in the economy, an economic contraction. As stocks are a leading indicator, meaning we see them move ahead of the economy, this downward market coupled with the yield curve inversion we saw a few weeks ago, may be signally more difficult economic times.
None of this is fun. Looking at your accounts right now gives you that slightly nauseous feeling in the pit of your stomach. But if you are still working, and you don’t lose your job (which seems unlikely given the number of job openings right now), this downturn is a wonderful opportunity. You can buy more shares with each contribution to your retirement accounts. You can harvest losses and reposition your portfolio in taxable accounts with less tax consequences.
The S&P 500 is still higher than it was two years ago. And I’m willing to bet that in two to three years, it will be higher than it is today. On average, one out of every three years is a negative year. As painful as it is, the drop is a normal occurrence.
Something that’s not normal, at least in Maryland, is a tax cut. And yet the legislature did just that for retirees. If you are 65 or older, retired, and make less than $100,000 a year, or married and making less than $150,000 a year, Maryland will give you a tax credit of $1,000 for singles and $1,750 for married couples. If you’re at the higher end of that income number, this will not fully eliminate your state tax. But it will provide significant state tax relief for many retirees.
Your action item for the week is to go into your phone and check all of your subscriptions. If you’re as old as I am, you can have a teenager show you how. Unused or unwanted subscriptions can add up. Cancel anything you’re not using or don’t find useful.
There’s more information on our Facebook page, and our website at covingtonalsina.com.
Investment advice offered through Great Valley Advisor Group, a Registered Investment Advisor.
All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly.
The opinions voiced in this show are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which strategies or investment(s) may be appropriate for you, contact the appropriate qualified professional prior to making a decision.