The S&P 500 index was up 9.11% in July, which has some market pundits suggesting that the bear market is over.  Conversely, it seems like an equal number of market prognosticators are warning that the July returns were simply a bear market rally, and a lower bottom is yet to come.  Was the rally in July a precursor for more positive near-term performance or merely a bear market rally?  Have we seen the market bottom?  How should clients invest given the uncertainty?  Let’s examine some historical data as a reference.

The average length of a bear market is 9.6 months, 289 days.¹  The S&P 500 Index crossed into bear market territory on June 13, 2022.  If the current bear market follows historical averages, we may be in the early innings.  However, if we consider some recent bear markets, the length of the bear market can vary dramatically.²

Current market low for S&P 500 in 2022 was on 6/16/22 at 3666.77. 

Was the recent rally in July an indication of broader, continued gains or merely a bear market rally?  It’s yet to be determined.  However, there are strategies to help investors get invested and stay invested to take advantage of potential gains. 

• Dollar cost averaging.  While making periodic investments over time does not guarantee performance, it does provide the opportunity to make investments at different price levels – with the goal of acquiring investments at a more favorable average cost.
• Stay committed to long-term investing goals.  As evidenced from the most recent bear markets, while they can be painful, they do not last forever.  History has also shown that bull market returns following bear markets can be significant.

• Avoid trying to time the market. Calling the true market bottom is nearly impossible.  According to Crestmont Research, from 2016 -2021, the percentage of up days for the S&P 500 index was 56% – leaving 44% as down days.  Through 8/22/2022, the percentage of up and down days for 2022 is effectively equal at 50%.
• Avoid decisions purely based on emotion as they can cloud investor behavior.  During periods of extreme market volatility, it may be helpful to consider the advice of successful investors.  Peter Lynch, legendary manager of the Fidelity Magellan fund: “Long term, the stock market’s a very good place to be. But I could toss a coin now. Is it going to be lower 2 years from now? Higher? I don’t know.  The stock market’s been the best place to be over the last 10 years, 30 years, 100 years. But if you need the money in 1 or 2 years, you shouldn’t be buying stocks.  In the stock market, the most important organ is the stomach. It’s not the brain.”³

Whether we have seen the market bottom, just experienced a bear market rally or we are only in the early stages of a prolonged bear market, ESI partners with quality sponsors that make a variety of resources available to help clients manage periods of volatility and uncertainty.  Whether it’s social medial posts, client educational materials or scheduling calls with asset managers, ESI is happy to assist reps and your clients.  Please contact ESI Business Development at 800-344-7437 to discuss investing resources. 

Dan Randall, CFP®, CLU, ChFC
Vice President – Product Management, Equity Services Inc

¹ 10 Things You Should Know About Bear Markets, The Hartford, 12/21/21

² Bear Market Rallies, Forbes, 6/23/2022

³ Lessons from an investing legend, 8/11/2021 Fidelity

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Monday evening we welcomed this year’s ESI Elite Symposium attendees and began our business sessions first thing Tuesday morning with a jam packed agenda!

We began the morning hearing from ESI’s President & CEO, Ata Azarshahi where he congratulated all of ESI on their 2021 success of $1.5 billion in sales (up 31% over 2020!) and reported on 91% growth in total AUM since 2016! How are we doing this? Because of YOU – ESI’s rep base, where we are seeing more and more ESI reps hitting major sales milestones each year. Ata closed out his remarks thanking our top producing agencies and reps – noting that 2021 was the first time ESI has seen two reps, Steve Simon and Mark Vosk, finishing the year in over $1 million of GDC each!

Following Ata, we heard from Rebecca Dunne, VP of Affiliated Distribution, who we are excited to have as the next leader of the Affiliated channel starting this summer! Rebecca also started off by congratulating everyone on a record breaking life sales year for the channel hitting $78 million of WNAP in 2021! Rebecca attributed this to the strong partnership ESI shares with the Affiliated channel, but was sure to remind us that “last year, was so last year” and ESI and Affiliated will continue to partner closely. To ensure a strong 2022, we are working on solutions around succession planning, teaming, and additional comprehensive, advice-based solutions which encompass all asset classes.   

Before our mid-morning break, we received a quick re-cap of everything the ESI Field Committee has accomplished in the past year from co-chair Tyler Degeneffe –from getting Entrada and AdvicePay through the door to introducing two new members to the Committee, Michelle Lawrence and Gary Liskow. National Life’s Lee Revels also joined us for an annuity update pointing out that NL Annuities sit in the top decile of offered rates in comparison to our competitors, and reminded us of the bond characteristics of a fixed indexed annuity.

Dan Randall, VP of ESI Product Management kicked off the second half of the day showcasing new opportunities for ESI Illuminations – specifically the expansion of our Separately Managed Accounts (SMAs) offering! This enhanced SMA line-up can help you differentiate your services, provide increased transparency of ownership, give you the ability to customize at the client level, and provide tax overlay opportunities. We have added eleven new high conviction managers including names such as Columbia and Principal.

We then received an economic update from Chief Investment Officer, Jason Doiron. JD shared that what we’ve experienced in more modern times, is the Fed (starting with Alan Greenspan) gradually changing the way inflation is measured, moving from the traditional (Paul Volker and prior) calculation of looking at both asset inflation and consumer price inflation to a more concentrated focus on consumer price inflation. This fundamental shift has created unprecedented times, and while we’re watching the Fed begin another tightening schedule, we’re looking at the second highest CPI on record – at the fast acceleration rate we’ve ever seen – and unemployment at an all time low, it is unclear if they can land this softly. So what’s the best performing asset Jason has today? Not cash! Instead, a vehicle which not only provides a guaranteed death benefit, but also provides great tax advantages, and coupon potential with interest crediting.

Chairman, CEO & President, Mehran Assadi closed out the day stating “I love ESI!” (so do we, Mehran!). 2021 was the best year in history for the company for both profitability and top line growth, and with this growth oriented leadership team in place at National Life, he is confident that ESI can grow sustainably and responsibly to achieve its goal of 1,000 productive reps. Mehran shifted into addressing National Life’s big, scary goals of $750 million of WNAP and $5 billion of annuities – SPADs in particular – confident that we can achieve and exceed these opportunities, concluding the day re-affirming JD’s comments on life insurance being a valuable asset class. As amongst the global uncertainty we are facing today, our life insurance products are no longer just a sale for the mortality play, but living benefits as well; giving us the advantage we need to move forward and achieve our future growth goals.  

What an exciting start to ESI’s Elite Symposium in Park City, UT! We’ll be sure to share more highlights in next week’s Insights so stay tuned!

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