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The Dow has completely recovered its 2020 bear-market loss. Here’s what comes next

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By completely erasing its February-March 2020 losses, the bull market appears to have secured a renewed lease on life. But it may be just a short-term lease.

I’m referring to what the Dow Jones Industrial Average
DJIA,
+0.15%

  did this week: close above its previous high from earlier this year, thereby completely recovering its February-March bear-market losses. While other major market averages had already completed their own recoveries in the summer, the Dow — the bluest of blue-chip averages — had stubbornly refused.

Until now. Some of the analysts I follow are making a big deal of this, arguing that the market after reaching this point usually continues for much longer and rises much further. I decided to put their argument to the test.

To do so, I focused on the bull- and bear market calendar maintained by Ned Davis Research. For each bull market since 1900, I undertook the following two-step process:

•      I first identified the date on which the Dow closed at or above where it stood at the beginning of the immediately preceding bear market. This is the date on which the prior bear market’s losses had been completely overcome.

•        I next identified the date of the subsequent bull market high in the Ned Davis calendar, and where the Dow stood on that date.


Once the Dow had completely recovered its prior bear market losses, it didn’t begin another bear market until 21 months later on average.

If you were to focus on the average result that emerged from my analysis, you’d be highly encouraged indeed. Once the Dow had completely recovered its prior bear market losses, it didn’t begin another bear market until 21 months later on average — 1.8 years. Over that nearly-two-year period, the Dow gained an average of 48%.

Accordingly, if the current bull market were to live up to this historical average, the next bear market wouldn’t begin until August 2022, at which point the Dow would be trading above 44,000. No wonder the bulls are making such a big deal of the Dow’s eclipsing its February high.

Unfortunately, there is less here than meets the eye — far less. That’s because there is a huge variation in the historical data — variability which is masked when we focus on the average. When I shared my results with market technician David Aronson, he said that “there isn’t much in these results to hang our hat on.” Aronson is author of the book Evidence-Based Technical Analysis and co-author (with Timothy Masters) of Statistically Sound Machine Learning for Algorithmic Trading of Financial Instruments.

To appreciate just how wide the variability is in the historical results, consider the shortest length of time between a past bear-market recovery point and a subsequent bull market high: 33 days, during which the Dow gained 0.9%. If the current bull market did the same, the next bear market would begin in mid-December with the Dow just over 30,200.

Might a more upbeat conclusion be reached if we focused on bear market recovery times that were extremely quick, like the one since March? Unfortunately no. There is no statistically significant correlation in the historical data between the speed of its bear-market recovery and how far and high the market goes subsequent to its recovery.

None of this diminishes the market’s impressive recovery over the past eight months. It’s understandable that such a rebound would put investors in a giddy mood. But my review of prior recoveries suggests that we temper our exuberance.

Mark Hulbert is a regular contributor to MarketWatch. His Hulbert Ratings tracks investment newsletters that pay a flat fee to be audited. He can be reached at mark@hulbertratings.com

More:These seven stocks have doubled in 2020 — and analysts say they have further to run

Also read: A stock-market pro offers 10 reasons the S&P 500 can surge another 7% before 2020 ends



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My boyfriend inherited a home and $700K. He pays me $500 monthly rent. Should I ask him for $86K to pay off my condo?

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Dear Quentin,

I have lived with my boyfriend in my home for over 20 years. We never married, and I have three siblings. I also own another condo in the Caribbean, which I paid for myself.

My boyfriend inherited a home from his dad in the South and a large sum of money, just over $700,000. We just got back from this inherited home. He is still deciding if he/we should keep it.

I owe $86,000 on my current home, and my boyfriend pays me $500 a month rent and he pays the electric and cable bill. We also mutually share groceries. I appreciate all his financial help.


‘His ex-wife will get half of his pension and Social Security in Connecticut. I will not receive that as we were never married.’

I am 65 and get a monthly pension of $800 and receive $1,800 Social Security every month.Together, we own three condos. I have no savings, and own two properties.

He is divorced with six adult grown children. I have only met two of his children out of the six. For some reason, he does not want to get involved with their cookouts and parties etc.

He is close with his children, and speaks to his ex-wife on the holidays as needed about any of the children and grandchildren. We always travel alone. His children never travel with us.

His ex-wife will get half of his pension and Social Security in Connecticut. I will not receive that as we were never married. What should I do financially to secure my future?

Should I ask him to pay off my condo balance of $86,000, and promise to leave the condo to him rather than my siblings in my will?

He does not want to get married, for some reason; he was married once and he said he does not want to do it again.

The Girlfriend

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Dear Girlfriend,

Your offer assumes that you will predecease your boyfriend, and that is not a given. If you do not die before he does, he is essentially giving you $86,000 because (a) partners should help each other out, (b) he has newfound wealth and he should spread it around, and/or (c) it’s not fair that he should have all of this dough landing in his bank account when you have had to scrimp and save all of these years. It has a faint ring of that school-days refrain, “If you give me one of your sweets, I’ll be your best friend.” In this case, you already are his best friend. So there’s no upside there.

You have been together for 20 years and you never married. The reason for that may be at least partly related to your respective financial affairs. Your boyfriend has a lot of financial responsibilities, one home (at least he had one home before his latest windfall), children, and an ex-wife, while you have two homes, and are free of your partner’s other financial burdens. He also pays you $500 rent every month, which was obviously a convenient arrangement for both of you. But it seems late in the day to draw a line connecting his financial future, that of his ex-wife’s and your own.

Sometimes, it’s good to ask for help. People often want to help, and it’s a privilege to help out a loved one. But to ask him for a chunk of his inheritance to pay off your home, especially when you have another condo in the Caribbean that you could sell, seems bad timing at best, and opportunistic at worst, which brings us back to the “I’ll be your best friend” sentiment. You are effectively asking your boyfriend for something with nothing in return. By not marrying, you have kept your finances separate. You have gotten this far on your own. There is a lot to be said for that.

The Moneyist:I have crypto FOMO! ‘I’m too old to sit and hope I can make up for the lost time by safely investing my little bit of money’

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My ex-wife passed away. I’m the beneficiary on her life insurance. Her family wants me to pay her funeral expenses and won’t leave me alone

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I am 32, and just a month ago I found out that my ex-wife, whom I haven’t spoken to since we divorced, passed away tragically in a moped accident. My ex-wife had life insurance through her job. My ex-mother-in-law informed my father that my ex-wife had kept me as her beneficiary on her life-insurance policy, and her family wants the money for funeral costs, bills, etc.

Not only did my ex-wife have me on her policy as the primary (and only) beneficiary, she updated my home address on the policy after we divorced. Also, I found out through the insurance company that my ex-wife had two term life-insurance policies, one for me and one for my ex-sister-in-law.

I blocked my ex-in-laws, and now I received a threatening voicemail from a blocked number, so I’ve taken it upon myself to notify the authorities. I live in New York, I am remarried, and my divorce was very simple and easy. We left the marriage with what we came into it with. The life-insurance company approved the check in my name, and is sending it to my home.

Am I legally in the clear? I have not spoken to or bothered these people once since we divorced five years ago. I just want to be left alone and move on with my life.

Thank you very much in advance.

Best regards,

Fed-Up Ex-Husband

You can email The Moneyist with any financial and ethical questions related to coronavirus at qfottrell@marketwatch.com, and follow Quentin Fottrell on Twitter.

Dear Fed Up,

First, I’ll deal with your life insurance concerns, and then the subject of your ex-wife’s funeral expenses.

The life-insurance policy was between your ex-wife and her insurer. It’s possible to overturn a life-insurance policy if it explicitly goes against the terms of a divorce decree, as happened in this case, but that too was a complicated lawsuit. Some states do have statutes that can revoke such beneficiary arrangements.

In “Kaye Melin and Metropolitan Life Insurance,” the children of the deceased were awarded the proceeds from the life-insurance policy, not the ex-wife who was named as beneficiary on the agreement. In that case, the law presumed that what her ex-husband wanted after their divorce was incorrect.

The ruling stated: “Thus, if a person designates a spouse as a life insurance beneficiary and later gets divorced, Minnesota law provides that the beneficiary designation is automatically revoked. At least twenty-eight other states have enacted similar revocation-upon-divorce statutes.”


‘I’m reluctant to say that you are ‘in the clear,’ given previous court rulings, and statutes in some states on the revocation of named beneficiaries post-divorce.’

I’m reluctant to say that you are “in the clear,” given previous court rulings, and statutes in some states on the revocation of named beneficiaries post-divorce. In your case, it seems clearer that your ex-wife wanted you to be the beneficiary. She did, as you say, update your address. It would be hard to see a more explicit sign of her intentions than that.

“Unless the policyholder of the life-insurance plan changes the beneficiary designation officially, the people originally named will remain the beneficiaries through the life of the policy,” according to Heban, Murphree and Lewandowski, a law firm in Toledo, Ohio. “Even if the policyholder was not on speaking terms with the individual upon his or her death, that beneficiary would still receive the income.”

“In the case of someone who divorced and remarried, the policy may name the first spouse as beneficiary. If the policyholder never changed the policy to reflect the divorce and remarriage, the ex-spouse could end up with the benefit. This can cause the current spouse and any children from the second marriage to dispute the beneficiary designation on the policy,” it adds.

But much, I suspect, would depend on what state you live in, and the specifics of your case.

On a separate issue, it’s difficult to glean from your letter whether your in-laws had little funds to pay for the funeral expenses, or were mad as hell that you were listed as beneficiary and felt you should contribute, or both. On the one hand, it seems like they are not in a state of mind to be reasonable and, chances are, if you did engage it would lead to further demands and acrimony.

Perhaps you could talk to your ex-wife’s lawyer and see if there is enough money to cover the costs of her funeral and, if not, you could make a contribution. But given the alleged harassing phone calls, their anger and grief, and their antipathy toward you, you would need to have all correspondence go through the attorney and refrain from any direct communication.

There is no excuse for their taking their grief out on you. Still, spare a thought for her family. If you are fed up, imagine how they feel.

The Moneyist: My boyfriend talked me into depositing my paychecks into his bank account, and paying for a car in his name. What can I do?

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These money and investing tips can help you when inflation is burning a hole in your wallet

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Don’t miss these top money and investing features:

These money and investing stories, popular with MarketWatch readers over the past week, focus on helping you make sense of the recent spike in U.S. inflation. Understand how rising prices can affect your investment portfolio, and taking appropriate steps now to respond, can prevent unpleasant surprises later.



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