Dave Rumsey, CPA/IAR | Pettis Rumsey Inc. P.S. | 4229 76th St. NE, Suite 102 Marysville, WA 98270 | Phone: 360-659-8502




David Rumsey, CPA

Pettis Rumsey Inc.


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Bear vs. Bear, Are we headed for a recession?


Everyone really wants to know if we are headed for a recession. The answer does not matter as much as you think. Why?


I still believe we will not hit an official recession, however, it does not mean we will not have a bear market (down 20%). In fact, many of the areas have already hit this as of mid to late August.


What we really need to be asking is how far will it go down and how long will it last? The answer is just about the same for a recession (2 negative growth quarters in GDP) as it is for a non recession.


The average non recession bear market is a decline of 27.1% and lasts for about 6.5 months. The average recessionary bear market decline is about 36.9% and lasts on average about 21 months.


So if we are truly entering a non recession bear market the average length of time until it is over is just after Halloween. This will set up a solid run into the start of next year potentially.


However, if we fall much more than the 1000 mark on the S&P 500 we could see a self-fulfilling prophecy and actually enter another recession. I think we are in the former camp and may have a negative quarter, but not an official recession.


OK, what to do now? Keep investing in the defensive plays like a balanced fund or invest in an income fund until you feel the market has run its course down for the most part. (FYI - If your portfolio isn't set up to be 'defensive' or you don't know if it is or not, I can review & analyze it & recommend changes to make.)


Gold is not necessarily the place to be because from the time Nixon got rid of the gold standard until today (nearly 40 years), the market and gold have performed almost equally. In fact with the run gold has been on, this is usually indicative of market tops, not bottoms.


Regardless of which Bear market we are in or headed towards, there are still opportunities in currencies, stocks, and yes albeit much less bonds. I am going to taper my annual outlook to around 1350 on the S&P this year, meaning we may have already hit our top.


This means we may see another higher top at the beginning of next year. Earnings momentum is staying strong, but has slowed relative to the previous four quarters.


I have mentioned before we would see this at the end of this year and more so into 2012.



As always you can call our offices if you have any questions about investing, retirement or any other tax & accounting related issues, at 360-659-8502. 


Regards, David Rumsey, CPA/IAR


Disclaimer:  The opinions contained herein are not intended to be investment advice or a solicitation to buy or sell any securities. With any investment you should carefully consider the investment objectives, potential risks, management fees, and charges and expenses before investing.  Past performance is not a guarantee of future results. The investment return and principle value of any investment will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost.



Dave Rumsey, CPA/IAR | Pettis Rumsey Inc. P.S. | 4229 76th St. NE, Suite 102 Marysville, WA 98270 | Phone: 360-659-8502 | Fax: 360-653-4019 david@pettisrumseycpa.com | www.PettisRumseyCPA.com