Investing: What's next for a turbulent market

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Investors tossed about by the stock market’s rough seas are no doubt wondering what just hit them. A bear market? A bull-market correction?

We won’t know for sure until sometime in the future. But when it comes to your investing strategy, the answer matters less than you think. Stock prices peaked last September and have been in a volatility vortex ever since. From the September peak to the trough on Dec. 24, Standard & Poor’s 500-stock index fell 19.8 percent — escaping by a whisker the generally accepted definition of a bear market, which is a loss of 20 percent or more.

Dramatic downdrafts are often followed by big bounces, and S&P 500 has recovered some of last year’s lost ground. But the volatile swings aren’t over. “I’m confident that we will not go below [a loss of] 19.8 percent on the S&P 500, but we have to engage in some backing and filling to prove that was the low,” says Sam Stovall, chief investment strategist at research firm CFRA.

Think of the past 12 months as a rolling bear market, says Russ Koesterich, a portfolio manager at investment giant BlackRock. In other words, investors have punished various market segments in succession, starting with emerging markets early in 2018. Stovall calls the late 2018 collapse “the deepest of corrections.” But Jim Paulsen, chief strategist at Leuthold Group, sums up the downturn this way: “What you call it is way less important than what you do with it.”

Sharply lower share prices in relation to earnings and other yardsticks may have given an aged bull a little breathing room. Slowing economic growth that allows the Federal Reserve to pause its rate-hiking campaign is also a plus. As long as the economy doesn’t sink into recession, Paulsen sees the market testing its old highs (around 2900 for the S&P 500).

For now, Koesterich advises investors to use a two-pronged strategy: Keep more cash while also bottom-fishing for bargains in financials, energy firms, materials producers and industrials. Look for companies with strong balance sheets and a history of increasing earnings and dividends, such as aerospace and defense firm Northrop Grumman (symbol NOC) or Bank of New York Mellon (BK), says Stovall. “I’d have more overseas than in the U.S.,” says Paulsen. “International stocks are better values, and they’re coming out of a slowdown already.”

Whatever you do, make sure you’re investing in sync with your stage in life and your risk tolerance so you’re prepared for a real bear market — the one that will precede the next recession and could arrive later in 2019 or early next year. Because when that bear arrives, there might be nothing ambiguous about it.

(Anne Kates Smith is executive editor at Kiplinger’s Personal Finance magazine. Send your questions and comments to And for more on this and similar money topics, visit

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