The current market condition reminds me of Rocky Balboa’s face during his fight against Drago in Rocky IV…bloody, bruised and broken. The recent market beating is at the hands of the coronavirus and the chances don’t look good for avoiding a further beating and a final knockout punch.
But remember what Drago said about Rocky’s resiliency: “He is not human; he is a piece of iron.” We believe markets are just as resilient, given enough time.
Right now, the market’s round to round volatility reflects investors’ uncertainty as to how the virus will be contained, when it will peak and how quickly a vaccine can be developed.
Historically, these types of stock market pullbacks can be attractive buying opportunities; however, it is important to review past bear markets to provide a guide to what’s possible. Despite the unique causes of the current pullback, we may nonetheless see certain similarities to past events.
Bear market review
Since 1969, there have been five bear markets, all with different duration periods and price percentage declines. Using the S&P 500 Index, the duration of a market decline has ranged from three months to 2.1 years. Likewise, price declines ranged from -21.0% to -50.9%. Each market decline had its own unique characteristics that impacted both the duration and percent decline of each respective bear market.
The shortest bear market was the “V’ shaped 1987 crash, lasting about three months, declining 29.6%. The longest period of decline was the 2000 dotcom crash, lasting 2.1 years, and declining 44.7%.
The worst percent decline was during the 2008 financial crises propelling the market down 50.9% over 1.3 years.
Furthermore, regardless of the precise similarities and differences, reviewing past bear markets can help investors maintain their composure during difficult times and, especially for younger investors, to keep a long-term perspective.
The current crisis
The financial fallout from the coronavirus has been fast and furious. Investors are reacting to lower corporate earnings expectations due to frozen economic activity in parts of China and Italy and a general hunkering down of consumers as they avoid public places, travel less and curtail spending.
This is not a “financial” crisis but rather a short-term health issue that affects demand and supply. There are numerous government stimulus programs in the works that could ease the financial fallout, and once in place could accelerate economic growth over the longer-term once the virus is contained.
We believe all these factors point toward a short-term corporate earnings issue that suggests a “V” shape type of recovery, similar to the 1987 recovery period.
What to do now?
We don’t recommend trying to time the market or attempting to pick a bottom. However, we believe that “now” is the time to start dollar averaging into the market.
Just like Rocky’s comeback to win the fight, the market will come back from its beating, in our view. When things look as bruised and bloody as they do today, it’s helpful to return to past examples and emphasize a long-term perspective.
We make it simple for everyone to invest easily and sensibly.
Commitment to Education
The Funds’ investment objectives, risks, charges and expenses must be considered carefully before investing. The summary and statutory prospectuses contain this and other important information about the investment company, and may be obtained by calling 1-866-964-4683, or visiting www.monetta.com. Read it carefully before investing.
Opinions expressed are subject to change at any time, are not guaranteed, and should not be considered investment advice.
Performance data quoted represents past performance; past performance does not guarantee future results. The investment return and principal value of an investment will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Current performance of the fund may be lower or higher than the performance quoted. Performance data current to the most recent month end may be obtained by calling 1-800-241-9772.
Diversification does not assure a profit nor protect against loss in a declining market. Periodic investment plans do not assure a profit and do not protect against loss in a declining market.
Duration is a measure of the sensitivity of the price of a bond or other debt instrument to a change in interest rates.
Standard and Poor’s 500® Index is a capitalization-weighted index of 500 stocks. This unmanaged index is designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries. The index was developed with a base level of 10 for the 1941-43 base period. One cannot invest directly in an index.
All investments, including those in mutual funds, have risks and principal loss is possible. The Funds may make short-term investments, without limitation, for defensive purposes, which investments may provide lower returns than other types of investments. The portion of the Monetta Core Growth Fund that invests in underlying ETF’s that track the Index will be subject to certain risks which are unique to tracking the Index. By investing in ETF’s, you will indirectly bear your share of any fees and expenses charged by the underlying funds, in addition to indirectly bearing the principal risks of the funds. Growth-oriented funds may under-perform when growth stocks are out of favor. Please refer to the prospectus for further details.
Click here for the Monetta Fund Holdings
Click here for the Monetta Core Growth Fund Holdings
Fund holdings are subject to change and are not recommendations to buy or sell any security.
Past performance does not guarantee future results.
FUND DISTRIBUTOR: Quasar Distributors, LLC.