I am on the record as believing a bear market started last May. I've jokingly said several times that the call has bounced back and forth between looking right and looking wrong several times, back to looking wrong right now. The following chart shows a 7.9% gain for the S&P 500 for January which many are saying is the strongest single month since October 2015 and the best January since the late 1980's.
I have been transparent about the defensive action I've taken and when I took it but as a quick recap we bought BTAL, TAIL and SH. PTLC went from equities to T-bills in October and we sold VOX. I simply relied on the indicators I favor to think a bear market started and just stuck to that process, my process. I was clear that I did not know with certainty a bear had started which influenced my preference to protect by addition (buying the above funds) more so than sell noting several times that if the market rocketed higher we might lag but not miss it.
I still don't know what will happen but for now the S&P 500 is still below its 200 day moving average (DMA) and the S&P 500 is lower than where it was a year ago. There is also the historical tendency for the largest gains, like 8% in one month maybe, to occur during bear markets.
By adding BTAL, TAIL and SH and holding on to PTLC I was hoping the portfolio would be among other things less volatile than the overall market. If you lag a little that is one thing, missing large gains for selling out is an emotional mistake. There was a lot of selling on Christmas eve. While there is no way to know how many people sold out (not reduced, but got out) on December 24th only to watch the market rally 15% from the sidelines, some have. Holding on into a 20% decline and then missing a 15% rally is a quick path permanently impairing your capital.
You never need to be exactly right with these events but it is crucial that you not be exactly wrong. Being exactly wrong is avoided by simply not panicking. As I have started to say lately, regardless of whether this is or is not a bear market, the one after this one will start from a much higher level.