As I write this in November 2017 – things are unequivocally “good” in most investment accounts. In the last 12 months, the S&P 500 is up over 19%, the MSCI All Country World Index is up over 23%, and Emerging Markets are up over 31%. What’s more, these gains have come with nearly record low levels of market volatility.

For investors who aren’t taking distributions, many are seeing their accounts hit all-time highs.

It’s been over 8 years and 8 months since the last bear market ended in March, 2009. At 104 months – this is the second longest lasting bull market that the S&P 500 has experienced and puts us only 10 months away from a new record for the longest bull market in S&P 500 history.

So – does this mean that a bear market (a 20% drop in the S&P 500 lasting at least 2 months) is on the near horizon? Maybe yes, maybe no. Could we experience a bear market in the next few months? Yes, we could. Do we know where markets are going? No – without a crystal ball, it’s impossible to know in which direction markets will move. And anyone who claims to “know” is someone who probably shouldn’t be trusted.

While we may not be able to predict future price movements, I do have a prediction that I’m very confident in sharing: At some point, we will experience another bear market. At some point, the S&P 500 will drop by over 20%. It could happen later this month, or it may not happen for another 10 years, but inevitably, it will happen.

What will cause the next bear market, we don’t know. It could be a slowdown in economic activity. It could be a reaction to fiscal or monetary policy. It could be geopolitical. It could be a natural disaster. It could be a reduction in valuation multiples. It could be a response to a crisis in another part of the world. It could be investors losing market confidence. It could be caused by demographic changes and a shrinking workforce. It could be a black swan event. Or it could be something completely different.

Regardless, whatever the reason is for the next bear market – it’s not going to feel good. It will likely feel like there’s no end in sight. It will feel like “this time is different.” It will feel like every day you’re losing money. Perhaps most importantly, it will feel like you need to do something. You will feel the urge to change your strategy, deviate from your plan, and make adjustments to your portfolio. These feelings are to be expected and are very normal to have. Unfortunately, these feelings also lead to behavior that can make you your own worst financial enemy (ask anyone who sold out of the market in late 2002 or early 2009). Down years have an impact on your portfolio, but the degree to which they impact you depends on your ability to stay invested and not sell at the wrong time.

Those who stick to their long-term plan and don’t make emotionally driven adjustments to their portfolio during a downturn will fare much better in the long run. While it’s easy to commit to this sort of a strategy today, during the next bear market, it won’t be easy. It takes fortitude and discipline to stick with a strategy in the face of headwinds and market declines, but those who do will likely be rewarded.

Historically, there have been a lot of tough times for investors, but with each downturn, the market has bounced back and recovered to new all-time highs.

  • The stock market crash of 1929? The market bounced back.
  • The Cuban Missile Crisis and flash crash of 1962? The market bounced back.
  • Tighter monetary policy and rising inflation from 1968-1970? The market bounced back.
  • Abandonment of the gold standard and the OPEC oil embargo of the early 70’s? The market bounced back.
  • A second oil crisis and dramatically higher interest rates in the 1980’s? The market bounced back.
  • Black Monday in 1987? The market bounced back.
  • The tech bubble in the early 2000’s? The market bounced back.
  • The great recession and housing crisis from 2007-2009? The market bounced back.

Investing isn’t easy. Psychologically, in the face of pain, it’s a natural reaction to want to take action. A better tactic is to review your financial plan, risk tolerance, and asset allocation before any downturn takes place. Let this be your message in a bottle to look back on down the road, so that you’ll be able to weather the next market storm, whenever it does hit.