"Cyclical" bull and bear markets come and go. However, "secular" bulls and bears come and stay, as SMI's Mark Biller explained last week on radio's Faith & Finance program.
He discussed why secular bears can be particularly tough on bond investors and detailed how SMI has taken measures to address the potential of a secular bear market in bonds.
Mark and host Rob West also answered listener questions.
Click the play button below to listen. Scroll down to see the transcript.
Faith & Finance airs weekday mornings on American Family Radio. A different version airs weekday afternoons on Moody Radio.
(More radio appearances by members of the SMI team are posted on our Resources page.)
Transcript
Rob West:
Markets rise and fall, but not all cycles tell the same stories. Mark Biller joins us today to unpack these market cycles and why they matter. Then it's on to your phone calls at 800-525-7000. This is Faith & Finance on American Family Radio, biblical wisdom for your financial decisions. (opening music ends)
Well, we're delighted our good friend Mark Biller is here. Mark is executive editor at Sound Mind Investing, a valued underwriter of this program.
We'll be explaining today the difference between cyclical and secular trends and how that might affect you. Also, we'll be taking your calls today specifically on the economy, the markets, your portfolio. This is your opportunity for investment-related questions — at 800-525-7000.
Mark, great to have you with us!
Mark Biller:
Thanks, Rob. Always great to be here.
Rob West:
Mark, I want to dig into this great piece you wrote for the Sound Mind Investing newsletter. It was titled Bulls and Bears, Cyclical and Secular. Let's start with the basics. People often hear about "bull" and "bear" markets, but what do those terms really mean?
Mark Biller:
A lot of times, we write these articles because there are all these investing terms, a lot of jargon that people hear, and they don't necessarily really know what they mean. So we'll write a piece like this as much just to help educate our readers and listeners on what these things mean and help them to be able to understand the markets a little bit better, and the things that they hear have it make more sense to them.
So getting to the basics here, Rob, cycles are part of the fabric of creation. Solomon wrote way back in Ecclesiastes 3, "To everything, there's a season and a time to every purpose under heaven." We see cycles all around us in the natural world, the sun, the moon, the tides, the seasons, and on and on.
And financial markets have cycles too. They go through these bull cycles and bear cycles. They're less predictable than those in the natural world, but these most basic cycles, what we call bull markets, when markets and indexes are rising and bear markets when they're falling. They help give us a framework for rising markets, which are bulls — and falling markets, which are bears.
Rob West:
To put a finer point on it, you explored the difference between what are called "cyclical" and "secular" bull and bear markets. So unpack those terms for us.
Mark Biller:
Yeah, absolutely. Those are really just fancy words for a very simple idea, and that is that there are both short-term market cycles and long-term market cycles. So we call the shorter-term cycles "cyclical," like the cycle of the economy, and then we call the longer-term cycles "secular."
Now, where it can get a little bit confusing is that you can be in a longer secular cycle that might last anywhere from 10 to 40 years, but along the way, as you're moving through that longer-term move in one general direction, you can have a bunch of these little cyclical moves back and forth even as you're going through this longer-term trend.
Rob West:
Perhaps you could give us an example of how these shorter cyclical trends fit within the broader secular trends.
Mark Biller:
Yeah, sure. So a good one is from 1968 to 1982 — that was about a 15-year period — and over that whole 15-year period, US stocks, the S&P 500 index was flat. It didn't go anywhere in nominal terms. In other words, it was at the same value in 1982 that it was in 1968. Now that sounds very simple, flat for 15 years.
But it wasn't quite that simple. That secular period had a bunch of shorter-term bull and bear markets where the markets actually moved a lot. It's just that those cyclical moves up and down offset each other over that long period.
Rob West:
Mark, why does it matter for everyday investors to know whether we're in one of these cyclical or secular trends?
Mark Biller:
Y'know, to be honest, it's probably more important when we're talking about bonds than when we're talking about stocks — and that's true for a couple of reasons. One of which is that stocks move so much more than bonds do that if the stock market is going to move 30% to 50% in either direction, we don't really care that much if that's a short-term cycle or a long-term cycle, that's a big move. So we're going to pay attention either way. Bonds are so much more gradual.
And also the second reason why this is more important for bonds is that these cycles tend to last so much longer with bonds that as we look back historically, you've really only had four or five of these big secular changes in interest rates and in bonds over the past 100 to 125 years. The last one — a lot of listeners are probably aware that we just had a 40-year bull market in bonds from the highs of interest rates in the early '80s until early in the COVID crisis. You had a 40-year period where rates were falling. When interest rates fall, that's good for bond prices. So bond investors did really, really well from the '80s until COVID.
A lot of listeners may be less aware that over the last five years, bonds have gone nowhere. In fact, a lot of bond investors are down overall from where they were five years ago. Now, five years is pretty long time, but those losses and gains in bonds tend to be much more gradual, so people tend to not pay attention.
And so really Rob, the reason we wrote this article was, for our readers, we wanted to help them understand how in bonds you can have the short-term cycles kind of go out of sync at times with the longer-term cycle. So we've been writing a lot about bonds for actually longer than five years, but definitely these last five years about how we think we may have entered a new long-term or secular bear market and bonds.
But this year, if you just look at 2025, interest rates have been falling. Well, that's been good for bonds. So 2025 has been a good year to be a bond investor, but that's really the first year in the last five where that's been true.
So you're trying to hold these two ideas in your head — one of which is, hey, interest rates are falling right now, so this is not a bad time to be a bond investor. In fact, I wouldn't be encouraging anybody to run out and sell their bonds right now. But at the same time, you're trying to clue people in to the idea that, hey, if we're talking about the next six months to a year, yeah, bonds are great. If we're talking about the next six years, I'm not so sure, and you might want to be thinking about the implications of that for the longer term of your portfolio.
Rob West:
So for somebody who's a long-term investor, how should these ideas really shape the construction of their portfolios?
Mark Biller:
Yeah, well, I'll tell you how it's affected us at SMI and the way we do it, and people can extrapolate for themselves from there. So the big theme really today, Rob, is that bonds may not be as helpful in the decade or so ahead as they have been over the last 40 years. So most people have gotten really comfortable with these huge bond allocations that never change in their portfolios.
So what we have done is we've worked with newer strategies and come up with some new approaches that allow us to take those big bond allocations down and replace them with some other things that can still help while being conservative.
Rob West:
Well, let's talk about those after the break, 'cause I'm sure a lot of our listeners are interested in that. We'll be right back with Mark Biller.
Rob West:
So thrilled you're joining us today on Faith & Finance here in American Family Radio. I'm Rob West. Mark Biller here today, our good friend, executive editor at Sound Mind Investing. You can learn more at soundmindinvesting.org.
We've been talking today about an article that Mark wrote for the most recent edition of the Sound Mind Investing newsletter. It's titled Bulls and Bears, Cyclical and Secular. We've explained what those mean — just the terms, but also how they relate to your portfolio. If you want to know more, head to soundmindinvesting.org to read the article.
Mark, you were saying that some of the changes you all have made in light of what you've been talking about specifically related to bonds, that a short-term outlook is bright. Perhaps longer term, four or five plus years, maybe not so much. That's caused you to look to other places for that portion of the portfolios you're building. Where are you going for that?
Mark Biller:
Yeah, so one of the things that we've done, Rob, is we have a strategy that we created about a dozen years ago, largely because we were looking ahead to a point where we're at now where bonds would not be as helpful. That strategy right in its name kind of tells you what we're doing. It's called Dynamic Asset Allocation. And in that strategy, it rotates. It uses these market cycles to increase and decrease our exposure to these big asset classes like U.S. Stocks, U.S. Bonds, but also it brings in other asset classes that a lot of investors ignore. Things like Gold and Real Estate and even Cash, things of that nature, Foreign stocks and so forth.
So we have in this article that we've been talking about that listeners can go read for themselves, does explain a little bit about how that process takes our newsletter folks who would normally be maybe a 60% stock, 40% bond person, it gets that bond exposure down to about 30% most of the time. But I do have to add the caveat that strategy, because of the way it can rotate, will actually have times when it will boost that bond exposure even over 40%. So it's kind of a where most of the time we're going to be lower, but in those times when you really want to have bonds, you're going to be a little higher. So it's kind of a flexible approach.
Beyond that though, we helped start an ETF earlier this year that invests across 20 different asset classes and uses some of that same flexible-allocation idea. So that's a product that people can find out more about on our site that gives them one thing that they can buy where that will have those asset classes moving up and down.
More specifically, though, we also have been adding things like commodities, energy stocks at times, sometimes real estate, I mentioned. We've talked quite a bit about gold over the course of this year. We have a fairly large allocation there and some tiny other allocations, even to things like Bitcoin and some of the other topics we've talked about over the course of the year.
Y'know, it really grabbed our attention, Rob, earlier this year in September, Morgan Stanley — so this is one of the big investment banks in the U.S. — their chief investment officer made headlines by suggesting that the traditional 60/40 stock-bond portfolio should be adjusted to 60% stocks, 20% bonds, and 20% gold.
Well, that was kind of a bombshell that went off in the asset management world. And honestly, I would not encourage someone to go out and put 20% of their portfolio in gold. That feels high even to me, as big a gold bug as I am. But the idea there of getting to something like 20% across a blend of gold, commodities, real estate, energy stocks, all these other diversifiers that we have been adding, that does seem pretty reasonable to me.
Rob West:
Yeah, that's really helpful, and I think it makes a lot of sense. Just that blended approach, being able to ratchet that up and down, and that's where this strategy can come into play at Sound Mind investing, even in the Private Client group, also in the ETF now, which just makes it really accessible. If somebody wants to learn more, what is the ticker on that ETF?
Mark Biller:
Yeah, that ticker is RAA for REAL Asset Allocation. They can find out more about that online and read all about it, or at soundmindinvesting.org.
Rob West:
We're taking your phone calls today for Mark Biller — 800-525-7000. Let's dive in today here in Texas. Paul, go ahead.
Caller:
Yes, I can understand how the importance of cycles for like I'm an index asset person with bonds and stocks, but what does the commentator think about the idea, "Look, I don't care what the market trends are. I care what the economic needs are. That's where I'm going to throw my eyeballs, and if I strongly believe that this economic need met by company A, B and C is going to go up, I don't care what the market cycle is. If you just play what you really believe economic need is, you can kind of forget the cycles."
What does he think about that, when it's good and when it's not good?
Rob West:
Yeah, great question, Paul. Mark?
Mark Biller:
Yeah, I really like that question too, Paul. It's really interesting. So in a way that actually strikes me as the way more investors used to think about investing, and even 25 years ago when I was earlier in my career, that would be a more common thought. We've moved so much more to where most folks are investing with index funds and really taking more of that broad market view. It's kind of refreshing, honestly, to get a question like that.
I think what I would say to that, Paul, is I agree with the premise to a great degree in very select situations. In other words, if you have locked in on companies that are so good at what they do, or so undervalued or whatever the case is that makes them such an outlier, you may be able to just do exactly what you're saying: Ignore all the noise, stick with that company and that company is going to be so good that you can do that.
With most companies, I would say, it's very difficult for an individual company to escape the gravity of the broader market. And so, in that context, even if you're right that I've really been able to identify the specific company or companies that are going to be great over the long term, you're still going to be buffeted by the winds of these cycles.
Now, some of what you do with that information is going to come down to, "Am I just making kind of a long-term set it and forget it decision and that's it. I'm not going to fool with it beyond that. Or am I willing to be a little bit more involved to try to maximize — even if I'm just using those same company stocks — to be able to lighten up a little bit when I think we're towards the top of a cycle and then add more when we're at the bottom of a cycle," which if you can do that, you can add tremendous value, but obviously that's a much higher bar than just, I'm just going to put the same amount of money into my account every month and let the market take care of it.
Rob West:
Let's go to Illinois. John, go ahead,
Caller:
Rob, bood to talk with you.
Rob West:
You as well, sir.
Caller:
Yeah, you were a real blessing helping me with two friends I had that really needed some direction with funds. They had money and didn't have a clue, and the one's been set up with FaithFi and really, really being blessed by it, so it's a good witness to him too. He needs Jesus.
But my question, I'm a multi-thousandaire for the first time in a while after getting a settlement on a bad accident I had. and basically just wanted to know how to best be a steward of probably invest in about $45,000 to $50,000 that I can just keep away at least for the next year. And then the rest I would just use to bless different organizations, like yours, and then fund functioning, relocating to Alabama near my daughter and little grandson. So, yeah, I'll shut up and listen.
Rob West:
Well, let me first of all just say, I'm so sorry to hear that you were in an accident. Are you doing okay?
Caller:
Yeah, yeah. One leg makes me look like more like a linebacker. The other one, I'm really only a punter. So yeah, I've got, it's called compression socks and living with lymphedema. But yeah, hey, thanks for asking.
Rob West:
Oh, absolutely. And let me just ask this, $45,000 to $50,000 you're talking about, would that be separate from what I would call your emergency fund, your liquid savings for the unexpected?
Caller:
You know what? Maybe $5,000 to $10,000 might need to be included more into that, Rob.
Rob West:
Okay. Yeah, I'd make sure you have at least three, if not six months' worth of expenses, monthly expenses carved away in that liquid savings account. So let's say that took your $50,000 down to $40,000, but you also said that your time horizon was a year. What happens in a year? Would you need it for the moving?
Caller:
Yeah, good question. At least see how this first year goes living in a new spot, having a vehicle for the first time since I got hit. See, I was on a bike when I got hit. So I hike, bike, train, plane, and that's it.
But now I'm going to have to have a car. I won't be in a metro area and I'll need the car to get around, and we know how big expense that can be. But I'm going to find a five to $7,000 vehicle with that extra $15,000 that I was talking about out of the $60,000. And then manage how much budget, how much the insurance will be, and likely mechanical expenses and things like that for the year.
Rob West:
Yeah, that's helpful. So Mark, given that let's say beyond his emergency fund, he's got, let's call it $40,000, but given the uncertainty about some of these changes in his lifestyle and some of the unknown expenses with that time horizon, what would you be thinking about? Is it a CD? Is it high-yield savings? Is it Treasuries or something like that?
Mark Biller:
Yeah. I think first of all of those questions are absolutely the right way to approach a situation like this to try to break down exactly what gaps in the foundation may need to be filled in first. Then we move to the time horizon, and that is going to dictate what we do. With a year or so as the time horizon. I certainly would not want to take any stock market risk. That's just way too short a period to have any kind of confidence that you're going to end up ahead instead of behind.
So you are talking then about the things you just mentioned, Rob, a high-yield savings account, maybe even a CD. If it were going to be — the time horizon was say one to three years, something like that — you could be looking more into the bond funds. Those sorts of things may get you a little higher return, but over the course of a year, the difference is going to be small enough that I probably would stick with the more certain approach, which is going to be either a good deal on a one-year CD, if you can find a good rate there, or a high yield savings account. You're not going to make a lot there, but you might be in the 3-and-a-half to 4% kind of range that you could do over a year in one of those vehicles and — those investment vehicles, I should say — and anything beyond that, you're taking enough risk that I'm not sure it really would be worthwhile.
Rob, any other thoughts you have?
Rob West:
No, I like that. Bankrate.com, John, would be the place to go to look at the CD rates and the high-yield savings that are the most compelling. If you want a Christian solution, go to faith fi.com/banking as well. Thanks for your call, John. We'll be right back.
Mark Biller:
Let's go to the phones. Michael is in Alabama. Michael, go ahead.
Caller:
Good morning, how are you doing?
Rob West:
Doing great. Thanks for your call.
Caller:
My question is, my wife and I are both — she's about six weeks away from retirement. I'm probably four to six months. She's 65. I'm about 66. We're three to four months away from being debt-free. We have almost $1.2 million in our portfolio, and we've hired a fiduciary to manage the account first — just under 1%. And he's got us set up for a projected draw — for me for age 92 and her age 94, which we both think is excessively high.
But my question is what would be a conservative draw to make sure my money is going to last, projecting that it would last. What should we be willing to draw a year and break it down by the month? What kind of percentage is good? I mean, I've heard numbers anywhere from four to 5%.
Rob West:
Yeah, we'll get Mark's thoughts on that. Just curious, though, what is he planning as a draw based on those projections you ran in your planning with him?
Caller:
A year ago, we gave him a budget of what we thought we could live on, and at that point, along with our social security, he said we could retire. Then. We both have tried to live on that budget and realize that it's not going to be what we thought it was, so we need about probably another thousand a month and percentage-wise, to me, he looks like he's given us less than I think we should be able to draw. In other words, I think he was just matching my budget, if that makes sense.
Rob West:
Yeah. If you did take what he was originally projecting, plus the extra thousand, what would that equate to on a monthly draw? I'm just curious.
Caller:
Around 3%, and that's about $2,700 a month.
Rob West:
Got it. All right. Mark your thoughts?
Mark Biller:
Yeah, that's a great question, Michael. You've got all the pieces there, I think, that are really relevant, so that's wonderful. One thing that really surprises people when you look at the actuarial data, in other words, how long people tend to live — I always see people's eyes widen when I throw this one out — is that a couple that is healthy at age 65 has roughly a 50% chance of at least one of those, of the couple, living to be at least 90 years old. And that is a real shocker to a lot of people because 90 still seems to most of us to be kind of an outlier age, but it's really about a coin flip that one of the two of you, if you're both in good health at retirement, right here where you are, are going to make it to 90. So that's one point in your advisor's favor that he's extending this timeline out in a really — a realistic way, I think if you're playing the averages.
Now, to your point, typically when you look at portfolio drawdown studies, there's kind of a classic 4% rule and you mentioned the 4% to 5% — and it's interesting because the guy who came up with the original 4% rule as a drawdown guide has a new book out that basically is saying that you can probably take that up to 5%!
But there's a lot of nuance in that, Michael, and you have to be careful, and it sounds like your advisor is trying to do this with you, which is great, because it really does come down to your budget, your spending needs and so forth. And that's not to say that yours are too high, but it is to say that there can be a lot of variation in that. There can be a lot of variation in how your nest egg is invested, and how aggressively you're comfortable continuing to invest.
Now, one factor in that 90-year-old stat that I just threw at you is that if you're roughly 65 now, that means that you're going to be investing this money for a long time, and that could be one reason to not get super-conservative with how you're investing it now, even though you're thinking, or maybe thinking, "I'm a retiree, I need to really ramp down my risk." Well, that's not necessarily true if you're talking about a 25-year time horizon, so that may be a conversation to have with the advisor, "Is there anything we can do to tweak this even slightly that's going to change those numbers enough that we think we can take a little more out as wen go."
One thing about these drawdown strategies that I would also talk to your advisor about is I've never been a fan of the approach of figuring out what your 3% or 4% or 5% is today and then adjusting that number simply based on an inflation factor or something like that. A lot of people will take that approach.
I think — it's more complicated, but I think it's also a better approach to think more in terms of looking at how your portfolio is doing and adapting that a little bit as you go. In other words, if you're having great performance in your portfolio for a number of years, you can afford to take more money out in withdrawals. Likewise, if you go through a tough market, you may have to tighten your belt a little bit on those withdrawals until the portfolio recovers.
Y'know, that's how we all think as we go through our pre-retirement life, and then for some reason we start to think that in retirement we don't have to think that way anymore. And I just don't really buy that.
So, Rob, I'd be interested in your thoughts too.
Rob West:
Oh yeah, no, I totally agree. I think that makes all the sense in the world. Michael, is that helpful?
Caller:
It is. Like I said, those are all pretty much, I'm guess fact-checking my investor. I listen to y'all every day. I drive trucks for a living, so probably five years I've been listening and every day I was like, "I need to ask another question." And I meet with him on a regular basis, but I never think about all these questions until I hear it on the radio.
Rob West:
Excellent. Well, it sounds like you have a great relationship with your advisor and I think this will be a nice healthy conversation, and I think Mark's hopefully giving you a few other things to think about as you approach that next conversation. But Michael, thanks for being a regular listener, my friend, and for your kind remarks about the program. We appreciate you being on today.
800-525-7000. We've got Mark Biller today, executive editor at Sound Mind Investing.
Let's try to get a few more phone calls in here. Alabama — Nan, go ahead.
Caller:
Yes sir. We are talking to an investment person when we're 66. We're thinking about retiring, we're not going to retire now, but maybe in two or three years.
We've got about $2.8 [million] in our investment portfolio. He is suggesting putting about $1.3 [million] into an annuity to give us a guaranteed income, and then the other from that — about $800,000 — keep in our investment portfolio. And then the other, whatever that is — maybe $700,000 — put in another like a savings product that he has.
I guess my question is what do you think about theory of, when you are ready to retire, not depending on that investment income, but putting it in an annuity or annuity product to get a guaranteed income. What do you think about that theory?
Rob West:
Yeah, a couple of questions and we'll get Mark's take on it. So you said all-in, you've got about $2.8 million. Is that right?
Caller:
Yes, sir.
Rob West:
Okay, and what is your income need? What do you need to draw from that to supplement social security or anything else you have?
Caller:
I think we would like about 10,000 a month. Does that sound too much? It seems like our income now is about a hundred, let's say $140,000 a year, so we wanted to kind of keep that the same.
Rob West:
Yeah, $140,000 plus Social Security or including Social Security?
Caller:
He's not including our Social Security.
Rob West:
Okay. Because he knows, we mean that's down around $11,500 a month, $140,000 — [so] not quite $15,000. But yeah, really helpful. Mark, your thoughts?
Mark Biller:
Yeah, Nan, there are a lot of ways that you can go, and your options increase a lot when you have a starting point like you do where you've done very well, you've obviously saved and invested, and worked hard to build up that nest egg and that gives you a lot of flexibility.
Y'know, if you've been a long time listener, you've probably heard Rob and I talk about how we're not generally the biggest fans of annuities. But a lot of this decision does come down to how much risk do you want to just completely take off the table and never have to think about, "Are we going to at some point down the road struggle to meet these income goals?"
Some of the trade-off with the annuity is being able to just lock in some of those answers a little bit more firmly than if you were not using the annuity and just investing this moneym and then you're a little bit more exposed to the ups and downs of the market and things could have to change.
Another part of that is the goals that you have with this money. If the goals really are, "We just want to lock in the income streams and not have to worry about that," then the annuity can definitely play a really helpful role in that. Now, exactly how much of it you allocate to the annuity versus leaving that to chance, that's a discussion to have with the advisor — the pros and cons of going up or down from that amount.
Basically what I'm saying, Nan, is if you are wanting to continue to grow this, I think you probably would be able to do better outside such a big annuity piece. But once you get to retirement, that's not really what everyone wants to do with their portfolio. And so it's okay too if you want to say, "You know what? This is going to really raise the floor on the worst-case scenario that we would run into." And that may be, after you discuss it and pray about it, exactly where you decide you want to be. So I would not rule it out. I would not rail against that. I think maybe the discussion is in the levels and do you really need to have as much in a really conservative savings portion if you're also doing quite a bit in the annuity.
Those are probably the questions that I would just have a conversation about with your advisor. Rob, what are your thoughts?
Rob West:
Yeah, I think that's right. I mean, you guys are right there in terms of if you need 140,000 a year, 11,500 basically a month with 2.8 million, you should absolutely be able to support that and have this money last the rest of your life and have plenty to either leave for heirs or give away or both, so you're in really good shape.
The nice thing about staying outside of the annuity product is you have full access to the money, so if you all needed larger chunks of it for, let's say long-term care or something that was very costly in terms of your housing or medically related, you'd have it. But like Mark said, if you get greater peace of mind by, I wouldn't put all of it in an annuity, but taking a portion of it and saying, okay, at least we know for the rest of our life we have this amount that we can count on and then we can manage the rest through a properly diversified portfolio, then so be it. That's not our first choice, but there's plenty of reason to do it again if it fits your needs, goals and objectives.
I would say not all annuities are created equal, and I don't know your advisor, I don't know the product he or she is recommending, and I'm not saying they're not putting your best interests first. But some products are very expensive and generate a lot of commissions, and so I would just want to make sure that it is, in fact, the very best thing for you and also related to this cash product.
So if you've got a great trusted relationship, maybe you stay put and go with this, but hopefully that's given you at least a few more things to think about. Nan, Lord bless you. You all have done very well and we appreciate you calling the program today.
Alex, Roy — I apologize we didn't get to you. Let's see if we can get you scheduled for tomorrow's broadcast.
Mark, so thankful for our partnership and your time today, sir.
Mark Biller:
Always a pleasure, Rob.
Rob West:
Folks, if you want to read this article we've been talking about, go to soundmindinvesting.org.
Here at the end of the year, every gift to FaithFi [is] doubled. If you love the program, head to FaithFi.com/give. We'll be able to send you a copy of my new devotional as well.
Big thanks to Taylor, Devin, Sandy, and everybody here at FaithFi. On behalf of Mark Biller and the team, we'll see you next time!
