In June 2022, U.S. stocks officially entered a bear market as popular market indexes – such as the S&P 500 – fell more than 20% below previous record closes. Those losses have since been met by recent upticks over the past few weeks, though some commentators are warning of a bear market rally, as stocks may be still set to hit new lows.
Investors and financial advisors often react differently to market downturns, as advisors may be more comfortable staying the course or even investing during the lows. In this study, SmartAsset surveyed almost 300 financial advisors on our platform to get a better sense of how advisors and investors are responding to the current bear market. For more information on our data and how we put it together, check out our Data and Methodology section below.
- Advisors are more confident in buying the dip than their clients. Only about 9% of surveyed financial advisors say that clients are responding to the bear market by buying the dip. However, more than 25% of advisors are recommending the strategy to clients, recognizing the downturn as a potential opportunity to buy stocks on “sale.”
- Clients of financial advisors may be more market savvy than the general population. About eight in 10 financial advisors say that their clients are responding to the bear market by either staying the course or buying the dip. This figure is high relative to the general population, where commonly people fall into the trap of buying high and selling low.
- Many advisors recognize the bear market within a broader historical context. Since 2000, there have been a total of four bear markets, including the current one. While the severity and length have differed dramatically, bear markets are nothing new. This point is emphasized by advisors in their descriptions of how they speak to investors who may be concerned about the sell-off.
Client vs. Advisor Responses
Despite recent stock market shocks, most clients and advisors are either staying the course or buying the dip. About 89% of advisors say that their clients are employing one of those two strategies. The figure is even higher for the percentage of advisors recommending either action, at close to 94%.
In fact, only about 2% of clients and advisors are selling equities and moving into cash. Another roughly 9% of advisors say their clients are responding by not selling current investments but pausing new investments. This figure is significantly different than the percentage of advisors suggesting that strategy. Fewer than 4% of advisors are recommending that their clients respond by pausing new investments.
The chart below compares how clients and advisors are responding to the bear market.
What Are the Experts Saying?
As previously noted, many advisors point to the current bear market within a larger historical context. In isolation, the bear market may scare investors. But historically, bear markets can be thought of as standard market ebb and flow.
“Bear markets are a natural part of an investment cycle," said Ryan Barber from VantagePointe Financial in Saginaw, Michigan. "Stay the course. Better yet, buy the dip.”
Beyond understanding the bear market as part of a larger investment cycle, many advisors recommend looking at your portfolio over the long-term.
“While certainly emotionally challenging, bear markets may present favorable buying opportunities for the long-term investor," said Sebastian Bunster, an advisor at IRIS Financial in Raleigh, North Carolina. "A big part of total return includes the price you pay for an asset, so temporarily depressed stock prices can provide attractive entry points when establishing, or adding to, positions in strong, quality companies.”
Current market prices are temporary, and over the long-term, now may be the time to buy.
Data and Methodology
Survey data for this report was collected by SmartAsset between August 2, 2022 and August 16, 2022. We asked financial advisors the following questions:
- How are your clients generally responding to the bear market?
- How are you advising your clients to respond to the bear market?
- What advice would you give an investor who’s concerned about the bear market?
In total, 275 financial advisors responded to our survey.
Tips for Investing During a Bear Market
- Check out our matching tool. A financial advisor can help you make smarter financial decisions such as moving or being in better control of your money after you land a new job. Finding a qualified financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with up to three financial advisors who serve your area, and you can interview your advisor matches at no cost to decide which one is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
- Invest carefully. SmartAsset's guide to investing during a bear market offers some specific tips and tricks to navigate choppy waters. Among them: seek out companies with high earnings per share, gravitate toward index funds and stagger your investments.
Questions about our study? Contact us at firstname.lastname@example.org