The Wall or The Wallop

It should be noted that bear markets, by definition, market drops driven primarily by approximately 20% or more over a prolonged period, are a common fear for investors. That being the case, many investors worry that not recognizing the next bear market on the horizon will severely impair their chances of achieving their long-term financial goals. Unfortunately, although it is easy to identify a bear market in retrospect, identifying a bear market as it develops is much more difficult. Even so, there is a key to this, the key is to have the perspective to observe and identify the correct components and discipline to prevent their emotions from getting in the way.

In a Fox Business Network interview on December 18, 2014, Ken Fisher said, “Bull markets really only end two ways: The Wall or The Wallop. The Wall is: They climb the “Wall of Worry” until there’s no more worry. Or The Wallop is: They get hit by a big, bad thing that nobody ever talked about before, which is at least a couple of trillion dollars in magnitude … You look for those two, and otherwise, all the little stuff, you want to not pay too much attention to”.

Bull markets really only end in two ways

It is necessary to emphasize that it conceptualizes that there are only two ways in which bear markets begin, on the one hand, this the Wall, which is a bull market, a sustained period, usually years, of increases in the prices of shares, rises to the “Wall of Concern”, and then it is exhausted in the midst of the generalized euphoria of investors. Most of the times the bull markets are exhausted, which best describes the legendary investor Sir John Templeton: “The bull markets are born with pessimism, grow skeptically, mature with optimism and die with euphoria.”

While, on the other hand, this the Wallop, which is established as a negative surprise with the power to bring down several trillion dollars of global Gross Domestic Product (GDP) affects an ongoing bull market. Sometimes, a bull hits an unexpected and immovable object large enough to knock down some percentage points of the global GDP, and this can only be enough to start a bear market. What do we mean by “immovable object”? It is a big, bad and unexpected negative that “knocks down” an economy and an otherwise strong bull market. In this case, the unexpected negative is enough to derail the bull market:

Even so, the Wallop can sometimes coincide with the Wall, if a bull market that is on top of the “Wall of Worry” is Walloped

Read more.

Source: Fisher Investments Canada