What is a Bear Market?
The bear market is a market where stock prices are falling, which encourages investors to sell because the downward trend is highly unpredictable. Keeping shares in a bear market can be risky because the investment may have lost complete value. A bear market happens “when stocks decline at least 20 percent of their peaks. A correction is when stocks fall 10 percent.” (CNBC)
Historically, “the average bear market lasts for 15 months.” (CNBC) While there are several instances of what causes bear markets, it is important to look at other sources for a return on investment during these times. Bear markets are volatile because they are unpredictable and investors can lose a substantial amount of money. Fifteen months in a bear market without a correction is devastating to any investor's portfolio and the damage can even result in losing more assets than you started out with. However, there are measures that can be taken to protect yourself and your investments during these negative times. An asset group that does not follow the decline of bear markets is Precious Metals. Spot prices of Precious Metal coins and bullion do not flow with the prices of shares in the stock market. During periods of a bear market and a correction to the market, a safe investment vehicle is Precious Metals.
Why Precious Metals
Precious Metals present a safer investment vehicle than stocks for varying reasons:
- Precious Metals are not tied to the stock market. Regardless of what happens in the stock market, Precious Metals are safer and more reliable than stocks. Because stocks are tied into a company, many factors make it a risky investment. The company can fold, be sold or controversy can force stock prices to go down. Precious Metals are a commodity, so the value you hold is something tangible and not tied into a system that can fluidly lose or gain value.
- Metals provide stability during economic uncertainty. Stock markets often see a prolonged bear market in times of economic uncertainty, which can be caused by world events or geopolitical maneuvering, leading to dips in the S&P 500 regardless of how a company is perceived financially. The stability Precious Metals offer comes in the form of holding a steady value through any world event or geopolitical situation.
- The long-term outlook is positive, even through inflation. No one knows when a bear market will occur but when it does, it can be devastating to one's investment portfolio. In the long-term, however, Precious Metals offer stability because of constant demand. Precious Metals are used industrially, giving them more demand value. “The reality is that Precious Metals hold value and increase their buying power when inflation ticks up.” (The Cheat Sheet)
Tae Kim of CNBC quoting Jesse Felder of the Felder Report writes, “A global bear market for equities will likely lead to another wave of money printing around the world, including here in the U.S. This will push investors back into Gold as both a safe haven and currency alternative kicking off a new bull market for the Precious Metal.” This indicates a safety net of sorts when, or if, a bear market comes again.
Hedging Against a Bear Market
The bull and bear markets can be unforgiving, but investors have different options to hedge against the negative stock market activity. There are multiple Precious Metal products that one can invest in if a bear market hits.
You can find a wide selection of Gold coins and bars or Silver coins and rounds at APMEX. They are a trusted Precious Metals retailer and will ensure you get the best customer service and the best prices.