Crises on the stock market: How to secure your assets in bear markets!

Crises on the stock market: How to secure your assets in bear markets!

The stock market has come under severe pressure in recent weeks due to various crises. Historical events such as the Vietnam War, the oil crisis or the Corona crash show that such crises often lead to bear markets in which stock prices fall over a longer period of time. This is reported by the NZZ.

A bear market begins when prices decline by more than 20% from the previous high. For example, the S&P 500 fell to 4,982 points on April 2nd, a decline of around 19% compared to the record high of 6,144 points on February 19th. On Friday evening, the index was trading at 5,868 points, meaning it was only just down since the beginning of the year.

History of bear markets

There have been twelve bear markets in the US since 1945 in which the S&P 500 lost more than 20%. Important examples are the recession after the Second World War, the oil crisis of 1973/74, Black Monday in 1987, the dot-com bubble, the financial crisis and the Corona crash in 2020. Historical data shows that the recovery times of the markets vary. Investors were often in the black after just one year, with the exception of the oil crisis, the dot-com bubble and the financial crisis.

Over the long term, investors who invested during a bear market have typically experienced positive returns. Five years after entering a bear market, investors have mostly recorded gains - with the exception of the Vietnam War, which ended with a loss of 11.3%. Long-term returns on global stocks averaged 5.2% per year after inflation from 1900 to 2024, while global bonds returned just 1.7% and U.S. money market securities returned 0.5% per year.

Strategies for investors in times of crisis

In view of the current market development, the advises NZZ not to fall into a state of shock in times of crisis. Investors should maintain regular investments in fixed amounts and not be unsettled by short-term market movements. Long-term investments remain important to build wealth.

Additionally, there are sectors that are considered crisis-proof, such as staple food companies, pharmaceutical stocks and oil stocks. These stocks are characterized by lower volatility. Value investing is a strategy that can be advantageous during bear markets because it targets cheaply valued companies with stable business models that pay regular dividends.

In order to protect the portfolio and minimize risks, many investors also prefer safe investments such as government bonds with a high credit rating. Uncorrelated underlying assets, such as raw materials such as gold, are also in the focus of investors. Purchasing put options (puts) can also be used as a hedging strategy to protect against price falls.

Short selling is another option used by professional investors to profit from falling prices. This is where investors sell securities they don't own and speculate that prices will fall. Due to the high risks associated with this strategy, retail investors should exercise caution and consider alternatives such as options when appropriate.

Overall, it shows that investors can potentially achieve positive results even in times of crisis with the right approach and a solid strategy. Market challenges are part of the game, and a long-term view of investments is essential.