What is a bear market?
At its very simplest definition, a bear market is official when stock prices decline 20 percent from a previous high. However, bear market implies that the market is experiencing a general downward trend, so a dramatic decline over a day of trading followed by a subsequent rally doesn’t exactly qualify as a bear market. A dramatic decline in trading over a short period of time is called a market correction, not a bear market. Because of this distinction, analysts qualify a bear market as a decline of 20 percent or more for a period of at least two months. A bear market doesn’t stop at 20 percent. While the stock market must decline at least 20 percent to be considered a bear, most bear markets don’t bottom out at 20 percent. Historically, bear markets tend to decline anywhere from 40-50 percent before rebounding. However, bear markets always rebound, so the key to investing successfully in a bear market is to choose stocks that can weather the bear and realize significant profits when
Using a classic definition of a bear market, we can say there have been nine bear markets in the last 50 years. In the worst, it took 90 months, or 7 1/2 years, to go from the market peak to the bear’s trough and back to the former peak. However, returns are time-sensitive, so when you begin to measure those returns will determine how a bear market will affect you personally.
” could clearly be very quick and easy or shockingly complex! We have tried to offer a conclusive bear market definition elsewhere. However, should you be hoping for a more indepth discussion of the complexities and impacts of bear markets, this is the page for you! Firstly, it is worth pointing out that recessions and depressions are the causes of these stock market conditions. Business reality always – somehow – underlies market prices. In his book, “After A Crash: Bear Market Money Making”, ‘Uncle’ Harry Schultz describes some of the effects of the 21 bear markets seen between 1900 and 1987. He describes the index as losing between 13.9% and 90% in the different downward periods. Clearly, adding these losses together totals an enormous amount of money. He also points out that these losses are for the index. Some stocks will have moved very differetly to the average producing many differing results for individuals. In addition, the index only tracks the biggest ‘blue chip’ companies.
