A bear market is when the price of an asset class declines substantially over time. Most analysts announce a bear market when prices have fallen 20 percent or more from their week high. The term is widely used when talking about the stock market, especially the major indices. Bear markets also occur in other investment asset classes, such as a gold , currencies, and U.
No one uses the term to describe price drops in consumer goods, such as computers, automobiles, or TVs. A bear market occurs when the major indices continue to go lower over time. They will hit new lows. More important, their highs will be lower than before as well. The average length of a bear market is days. The conventional wisdom says it usually lasts 18 months.
Bear markets occurred 32 times between and , with an average duration of days. This is around once every three years. A bear market can be kicked off by a stock market crash. That's is when the market drops 10 percent or more in a day or two.
That's when the major indices fall ten percent. That's when the economy stops growing and then contracts. That causes layoffs and high unemployment rates. A bear market is difficult to predict. It helps if you know where the economy is in the business cycle.
If it's just entering the expansion phase, then a bear market is unlikely. A bull market is the exact opposite of a bear market. It's when asset prices rise over time. Whenever sentiment is "bullish," it's because there are more bulls than bears, and they can actually create a bull market. These two opposing forces are always at play in any asset class. In fact, a bull market will tend to peak, and seem like it will never end, right before a bear market is about to begin.
A bear market rally is when the stock market posts gains for days or even weeks. It can easily trick many investors into thinking the stock market trend has reversed, and a new bull market has begun. But nothing in nature OR the stock market moves in a straight line. Even with a normal bear market, there will be days or months when the trend is upward. But until it moves up 20 percent or more, it is still in a bear market. Normal bear market cycles are also known as cyclical bear markets.
It lasts anywhere between five and 25 years, although the average length is around 17 years. During that time, normal bull and bear market cycles can occur. There is often a lot of debate as to whether we are in a secular bull or bear market. For example, some investors believe we are currently in a bear market that began in Bear markets are what created the old saying "It's not how much you make, it's how much you keep.
Updated November 23,More...