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What is a bear market?  Wall Street Stock Duration Explained

Wall Street started the week with heavy losses, plunging the benchmark S&P 500 index into bearish territory.

The S&P 500, an index of 500 of the largest publicly traded companies in the United States, fell 3.9% on Monday, taking losses to 22% from its January high.

These losses are due to a multitude of reasons, including the war in Ukraine, rising interest rates, a slowing Chinese economy, high inflation and fears of recession.

All of these factors combined have caused investors to rethink where and how to invest their money.

The tech-heavy Nasdaq has fallen further and is down a third since last November.

Many assets have been impacted by the significant fall on Wall Street, including cryptocurrencies, which have seen their value plummet by $2 trillion since peaking in November 2021. November.

What is a bear market?

A “bear market” is a Wall Street term used when an individual stock, or an index like the S&P 500 or the Dow Jones Industrial Average, drops 20% or more for a long period of time. Investopedia explains this below:

“A bear market is when a market experiences prolonged price declines. It typically describes a situation in which security prices fall 20% or more from recent highs amid widespread pessimism and negative sentiment. investors.

Bear markets are often associated with declines in an overall market or index such as the S&P 500, but individual stocks or commodities can also be considered to be in a bear market if they experience a 20% decline. % or more over an extended period. usually two months or more.”

How long does a bear market last?

Since World War II, bear markets have taken about 13 months to go from their highs to their lows and 27 months to break even, according to the Associated Press.

Sam Stovall, chief investment strategist at CFRA, told the AP that bear markets earned their name because bears hibernate, so bears represent a market in retreat, and when the stock market goes up, this is called a bull market, because the bulls are charging.

Traders working on the floor of the New York Stock Exchange
Spencer Platt

When was the last bear market?

The last bear market occurred in 2020, at the start of the COVID-19 pandemic, so just over two years ago. But after plummeting at the start of the pandemic, stocks have surged back through much of 2020 and 2021.

With the latest crisis, investors may be wondering if it’s time to sell. It depends on your personal situation, of course, but investment advisors often recommend that long-term investors look to ride out the short-term ups and downs in the stock market.

And keep in mind that some of the most successful days for Wall Street have occurred during or just after a bear market. For example, during the 2007-2009 bear market, there were two days when the S&P 500 rose 11%.


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