How long is the bearish market that started in the beginning of 2022 going to last?

I often write on Quora.com, where I am the most viewed writer on financial matters, with over 434.9 million views in recent years.

In the answers below I focused on the following topics and issues:

  • How do we fix the UK cost of living crisis in 2022?
  • Can a family of four in the UK live on a 60,000 pound salary?
  • How long is the bearish market that started in the beginning of 2022 going to last?

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Source for all answers – Adam Fayed’s Quora page.

How long is the bearish market that started in the beginning of 2022 going to last?

Despite the recent rises and “hopes” that the bottom was found, you should want it to last as long as possible.

That is the first thing that many people don’t understand. Plenty of people know by now that you can’t find time stock markets.

It is just too difficult to predict with consistency when falls, or gains, will happen.

But we can predict that markets will go through periods like this. It is the nature of the beast, as per the quote below:

Yet few people consider that a bear market is good if you are at least five years away from retirement.

That is assuming you have fresh money to put in. Ultimately, most of us have a salary or a business income.

That means that we have a “dollar cost average”, which is just a fancy way of saying to invest every month or at least periodically, whether we like it or not.

We can’t go to our boss or customers and ask for 30 years’ advance payment!

The below example shows how the strategy works well in a bear market of falling prices:

Therefore, if markets stay lower for longer, you buy more units for your money.

Just as somebody who bought during the Great Depression, or housing route in 2008, got rich if they held for a while, anybody who is patient and keeps buying during a downturn will benefit enormously.

Consider these facts:

  • Somebody who bought the US stock market, says the Dow or S&P500, made about 5x their money in about a decade, if they purchased in 2009.
  • A person who bought the Nasdaq in 2002 and held until last year made more than 10x their money.
  • Somebody who invested $100,000 during the Great Depression and then $1,000 a month (adjusted to inflation, of course as hardly anybody had 100k then) would have seen their account break even in just six or seven years and make massive gains a few years later, despite the longest bear market in history.
  • Those who bought during the worst of the 2020 Covid-19-related crash made 2x on their money

Based on all of this, people should:

  • Invest for the long-term
  • Not trying to time the markets but celebrate when they are down. Some people might look at the facts above and think they should wait until bigger bear markets, but as mentioned, it isn’t that simple.
  • Reinvest dividends. Even if somebody doesn’t have fresh money during crashes, dividends cushion the blow and ensure you return to where you were more quickly. The example below shows the FTSE100 during a stagnant period and now:

Nobody knows when this bear market will end. The average lasts about ten months, but some last much longer.

All I know is that many people will panic or lose faith. Only those with the emotional staying power will make a lot of money and see this as an opportunity.

Can a family of four in the UK live on a 60,000 pound salary?

In most parts of the UK, outside of London, you can comfortably.

Average salaries are below that, even though most family incomes are higher than individual ones.

So, if you are relatively frugal, you will find 60k easy to live on. You will be able to save and invest on the side.

Yet to live on 60k, you need to:

  • Localised your tastes. If you are coming to the UK from a part of the world where domestic help is cheap, then you can’t easily do that on 60k unless it is occasional help.
  • Depend on the state for health and education. It won’t pay for private school fees. This is one of the negatives of the UK system. It pushes most people to depend on the state – only 7% are privately-educated or home-schooled, which is lower than in many countries. It is seen as an elite thing, whereas the number of British people living overseas who send kids to private schools is massive.
  • Don’t live in the more expensive areas. So, the best areas of the bigger cities (not just London)

So, you can’t expect loads of space and comforts in some parts of the country for 60k before taxes.

That is because 42k after taxes doesn’t buy you that much housing-wise in some parts of the country once you pay for other costs.

But most families live on less than that, and plenty of Londoners do, despite the extra costs.

How do we fix the UK cost of living crisis in 2022?

I doubt it can be fixed in 2022. It is already baked in. Many of the price rises in global markets are outside the control of the UK anyway.

All the UK can do is hope to rein in inflation in the next year or two.

The best options to do that are:

1. Avoid a currency crisis, which I spoke about in this video below. The new leader shouldn’t go on a spending spree to do that. With interest rates rising, issues with Brexit and inflation, the market has to be confident that the UK Government and Bank of England will get on top of the issue.

2. Increase interest rates even if that causes a recession. A recession, naturally, will decrease demand, despite the pain.

3. Don’t give into unrealistic pay demands. Everybody wants a real terms pay rise. It is only right that individuals will try to look after their own best interests. Yet if people in the public, and private, sectors all get above-inflation pay rises, more people will just be willing to pay the new higher prices. Then it is back to the 1970s. I think this issue is unlikely though.

4. Help with international efforts to decrease the prices of wheat and grain. Deals similar to the grain deal that was struck between Russia and Ukraine last week will help.

5. Don’t lockdown again. Lockdowns disrupted the supply chains, which increased inflation.

6. Avoid militant trade unions grinding the country to a halt, which is connected to issue three.

Above all else, long-term, the focus needs to be on more productivity growth. People can’t consistently earn above inflation, if productivity isn’t increasing at a decent rate.

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Adam is an internationally recognised author on financial matters, with over 492.6 million answers views on Quora.com and a widely sold book on Amazon

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