BMO Nesbitt Burns
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40th Floor , P.O. Box 150
Toronto, ON
M5X 1H3

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The Market Decline And You

A Short History Of Bear Markets

(The following was written in the Fall of 2008)

Bear markets are frightening. Day to day and month to month it appears that there is no end in sight. In times like these history can serve as a guide for our portfolios and financial plans.

Please click here for a graphical representation of historical bull and bear markets in Canada since 1956. The US chart can be found here.

Over the past 52 years there have been 10 bear markets in the US and 11 in the Canadian market (not including the current one). They have ranged in length from 4 to 17 months in Canada and from 3 to 25 months in the US. The average for both markets is 9 and 14 months respectively.

Looking at the total return indices, which include dividends, the range of loss has been 15% to 39% in Canada and 15% to 45% in the US. The average for both markets is a loss of 27% and 26% respectively.

In every single case the market has bounced back - to a greater extent than the loss. In fact, the average return of the bull market that has followed each bear market is 127% in Canada and 148% in the US.

World leaders, economists and analysts all agree on two very important items, which we believe as well: we will bounce back from this, but, we do not know when.

If your portfolio includes equities, the best thing you can do at all times is to ensure that:

1) Your stocks are diversified;
2) Your stocks are of high quality; and
3) You stick with them since you never know when the markets will turn.

Please contact us to discuss our philosophy on investing in the stock market.