Top Nav

Bear Markets

Bear markets refer to a downward trend in the stock market. The length of that downtrend determines whether it is a secular or cyclical bear market.

A secular bear market is characterized by below average stock market returns by the S&P 500 for a long time, typically 10 to 20 years. Periodic bull markets spring up within a secular bear market until the next cyclical bear market takes over and carries the market to even lower lows. A cyclical bear market refers to one that lasts a few months to a few years.

Many factors can drive bear markets: weak economy, low consumer confidence, high unemployment, low stock valuations and low earnings, and all-around pessimism and uncertainty.

Bear Market Definition: Why is a Bear a Bear?bear-markets

  • Consistent decrease in stock prices.
  • Poor economy.
  • Geographic and political uncertainty.

Interestingly, one of the longest bear markets in U.S. history developed after the longest bull market in history. It began in with a collapse with the technology bubble in 2000, followed by world economic effects arising from the 9/11 attacks in 2001 and stock market downturn of 2002.

From 2007-2009, the Dow Jones Industrial Average, Nasdaq Composite and S&P 500 all experienced declines more than 20% from their peaks in late 2007. Then in 2008, subprime mortgage loans and credit default swaps ushered in the collapse of financial institutions and subsequent bursting of the real estate bubble.

Bubbles refer to a situation when asset prices are inflated and not based on fundamental values, i.e. the technology bubble in 2000, real estate bubble in 2008, and the first recorded speculative tulip bubble in 1637. Single tulip bulbs sold for more than 10 times the annual income of a skilled worker and then suddenly collapsed.

Some bear markets occur without warning; others happen gradually. It’s important not to let your investments continue to slide, hoping that prices will eventually rebound. Once a position drops below your risk tolerance, sell it. Trillions of dollars in retirement accounts were lost in the bear market of the 1990s when stocks were allowed to hit rock bottom.

The safest place to put your assets in a bear market is a money market, interest bearing accounts, bonds, sometimes gold. There are options to short the market—betting that it won’t go up—but that approach is riskier than seeking out safe havens to ride out a bear market.

4 Big Ticket Stocks For A Rebounding Economy

Unemployment is at its lowest levels since 2008. Consumer confidence is also at multi-year highs. It’s only a matter of time before consumers start to loosen up their purse strings. But I’m not talking about buying a new TV or enjoying a nice dinner out. Think bigger. U.S. consumers have delayed buying a new car, replacing [...]

Twitter Stock Surges on Blowout Earnings

Shares of micro-blogging site Twitter (NYSE: TWTR) surged higher yesterday after the company’s blowout earnings report. Twitter stock closed at $38.59 yesterday before the company declared earnings. Shares jumped almost $12 in after-hours trading following the report, a gain of over 30%. The stock gave back some of those gains but remains up over 20% [...]

Invest in the Future of the Drone Business

The Year is 2016… Broken O Ranch, Augusta, Montana: Billionaire Stanley Kroenke owns a 124,000-acre property that produces 700,000 bushels of grain every year and has 4,500 cows. To keep tabs on his vast property – the largest farm in Montana – Kroenke’s employees have just started using drones to take photos, monitor crops, and track [...]

Russia’s Latest Crisis Has Created Deep-Value High-Yield Opportunities

As a frequent flyer, I view the downing of Malaysian Airlines Flight 17 over Ukraine with more contempt than most. Being a passenger on a doomed jet might not be my worst nightmare, but it ranks near the top. What occurred on July 17 was an appalling tragedy, which is to understate the obvious. Emotions [...]

Why the Wave of New IPOs Could Be Bad News for Investors

Spark Energy (Nasdaq: SPKE) was a fitting name for yesterday’s lone initial public offering. The natural gas and electricity retailer’s debut may have “sparked” the biggest week for new IPOs since August 2000. Twenty-seven other companies have lined up to price their IPOs in the coming days, according to the web site Renaissance Capital. If [...]

More Recent Bear Market Articles

View All Bear Market Articles

popunder

Get the report FREE, enter your e-mail: