In a bear market, perspective is key. With that in mind, I have always found Bob Farrell’s 10 Market Rules to Remember (by way of David Rosenberg) very useful:
- Markets tend to return to the mean over time
- Excesses in one direction lead to an opposite excess in the other
- There are no new eras – excesses are never permanent
- Exponential rapidly rising or falling markets usually go further than you think, but they do not correct by going sideways
- The public buys the most at the top and the least at the bottom
- Fear and greed are stronger than long-term resolve
- Markets are strongest when they are broad and weakest when they narrow to a handful of blue chip names
- Bear markets have three stages: Sharp down, Reflexive rebound, and Drawn-out fundamental downtrend
- When all the experts and forecasts agree, something else is going to happen
- Bull markets are more fun than bear markets