Are we in a bear market? Here’s how to tell:
Historically, significant economic shifts – such as moving to an internet-based economy – have also precipitated bear markets.Before stocks drop, investors may pick up on several signs that indicate an ending bull run or upcoming decline. Here’s what to watch for:Bear markets often follow asset bubbles or bull runs that see investors become enthusiastic about the market.
During this phase, investor optimism causes prices to rise. When stocks peak, they may sell out to collect profits.Next, prices drop sharply, possibly preceded or followed by below-average economic activity, corporate earnings, and trading activity. Investors may sell in a panic.Some investors use bear markets as opportunities to make risky trades or buy in while prices are cheap. Trading volumes may rise while stocks experience relief rallies.Lastly, declining prices slow down.
But much of the market remains in correction territory. The S&P 500 is down 14.75% since 3 January, while the Russell 3000 is down 15.85%. The Dow Jones Industrial Average has fared best, declining just 10.74% since the start of 2022. And while the stock market at large may not be in for a bear of time , economic indicators suggest consumers will have a rough go for at least a few more weeks.
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