NAVIGATING A FLAT STOCK MARKET

I often discuss Bull markets and Bear markets but there is another type of important stock market cycle to consider – the Neutral or Flat stock market.

The Neutral or Flat market goes nowhere.  It stays stuck in a small trading range for a period of months.  Based on my cycle definitions, this type of market must last at least five months to meet my criteria for a Flat market. 

In most of my writings, I only talk about Growth or Bear Decline market cycles.  I simplify the market this way to make particular points about the stock market.  I actually track four market cycles for my Growth & Safety investment system – the Bear Decline, the Flat market, the Steady Growth cycle and the Volatile Growth cycle.  My investment rules change depending upon which market cycle we are in at a given time.

Today, I want to discuss some key points about the Flat market cycle because we have just experienced one.  This recent Flat cycle began on October 20, 2025, and ended on March 19, 2026.  During this period pictured below, the S&P 500 went nowhere and stayed within plus or minus 4% of its average price over the five-month period.  The cycle ended in late March when the market dropped further due to the war in Iran.

DISCIPLINE AND PATIENCE

The first point I would like to make about the Flat market cycle is the need to stay disciplined.  A common mistake made by both amateur and professional investors is to “chase” higher returns when markets are stuck.  People get impatient and take on more risk to boost returns.  This approach rarely works and when it does work, it is due to luck and not skill. 

Flat markets tend be relatively short cycles and nobody knows when they will begin or when they will end. Flat cycles tend to be followed by volatility.  Flat markets can turn into bull markets or bear markets, and it can happen rather quickly. 

Remaining patient during Flat cycles is the best strategy.  You must accept that it is not possible to win every battle in the stock market.  You won’t lose money in Flat cycles if you are patient.  You just need to be ready to position yourself for the cycle that follows the Neutral cycle.

Remembering that the stock market grows at 10% per year in the long run allows you to stay patient during Flat markets.  If you chase higher yields in Flat markets by investing in fixed income assets, you will likely miss the next bull market right around the corner.

THE PATTERN

Flat cycles usually follow bull market growth cycles. 

The recent Neutral market of 2025/2026 followed the amazing bull market of 2023 through the end of 2025.  Aggressive investors and my Growth & Safety clients saw their investments climb more than 70% over those three years in what was one of the best three-year cycles in market history.

It is typical for markets to pause after this kind of growth.  It happened in 2004 after the bull market of 2002 and 2003.  It also happened in 2011 after the bull run of 2009 and 2010.

Unfortunately, there is not a consistent pattern that occurs after Flat markets.  In some cases, the market declines for a period after being flat and sometimes the market begins a bull cycle. 

WHO WINS IN EACH CYCLE

Investing in the stock market is the best choice because the market is in growth mode most of the time (74%).  The Bear Decline only represents 14% of market cycles and the Flat market only constitutes 12% of market time.  Let’s look at who wins and who loses in each cycle. 

Aggressive investors are people who put close to 100% of their money in the stock market.  Conservative investors are people who primarily invest in fixed income assets.  Balanced investors are people who put some money in stocks (50% to 70%) and some money in bonds (30% to 50%).

Cycle Type	Winners	Losers	Neither
Growth Cycle (74% of time)	Aggressive	Conservative
	Growth & Safety	Balanced
Bear Decline (14%)	Growth & Safety	Aggressive
	Conservative	Balanced
Flat Cycle (12%)	Conservative		Aggressive
	Balanced		Growth & Safety

My fund, Growth & Safety, generates flat results in flat markets.  My fund has been flat since last October as it should have been. 

Aggressive stock market investors experience the same thing.  They stay stuck during Flat markets.  They win big in Growth cycles and lose big in Bear Declines.

Conservative investors see small gains in flat markets because they earn some interest while stocks are stuck in neutral.  Conservative investors win during Bear Declines because they gain around 3% while stocks drop 36% on average.  Conservative investors lose big during Growth markets, however, because they only earn 3% while stocks are gaining almost 20% per year.

Balanced investors (Target Date funds) post slight gains during Neutral markets due to interest earned on their fixed income assets.  Balanced portfolios lose big in Bear Declines (not as much as Aggressive investors) and also lose in Growth markets because they only achieve half the growth of the stock market.

In the table above, you can see why my Growth & Safety fund waits patiently during Flat markets.  We tolerate the lack of gains while we wait to win big in both the subsequent Growth cycle and the next Bear Decline.

The Flat market is the only cycle where my Growth & Safety fund doesn’t win.  We don’t lose money, but we stay stuck in neutral while we wait for the next cycle change.  We sit on the recent large gains, and we wait to pounce on the next opportunity – up or down.

If you would like to learn more about investing in my Growth & Safety fund and want to position your portfolio to win in the next Bull or Bear market, click below to book an appointment.  You will get a free investment coaching session as part of the discussion. You don’t need an Advisor; you need a Coach.

Book Appointment

Stay Disciplined My Friends,

Phil

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