No matter how strong and fierce a bull is, it takes some time off to get rest. It is true for financial markets as well, the prices also take some rest from soaring for some time.
Traders desire to smile to the banker often, however, it is fallacious to think that the Eagle will keep flying all day and night, without resting off its wings to feel refreshed and consolidated before it spreads its wings, rising upon the winds in the sky.
Financial markets have been hit hard and the charts have been blood red because of fallen asset prices. Thus, there are some things that you must know if you desire to understand the bear market.
Bear markets are characterized by prolonged price declines. When you see your asset portfolio displaying -20%, -48%, or whatever value it may be, you are experiencing a bear trend that may become prolonged depending on certain factors which may be fully unveiled via fundamental analysis.
You may not be able to fully predict the entrance of a bear market however, you may be able to read the writings on the wall and take a peep into the possible future of the market using past market data as metrics.
Here is some key worthy information about the bear market that you should take note of:
1. Bear markets are generally known to be short-lived: The average length of a bear market is known to be 289 days. This is relatively shorter than the average length of the bull market which is 9 months. You may be pondering, ‘How much longer are we going to stay in the current bear market?’ We’ll find out soon enough.
2. According to S&P Dow Jones Indices, bear markets occur on average of every 56 months. This isn’t a surprise given that during any season of significant inflation, or geopolitical shocks, the financial markets experience a downturn.
3. The worst bear market didn’t happen in 2009: Contrary to popular opinion, the worst bear market didn’t happen during the 2009 ‘Great recession’ neither did it happen during the tech crash in 2000. The bear market in 1929 resulted in an 86% decline in S&P, which lingered for some time afterward, it took more than two decades for a significant recovery.
4. Don’t panic: Looking at your asset read -48% may mess with your psychology however, brace up and refuse to sell off. If you have some liquid resources to keep your body and spirit together, rely on them rather than selling off your assets and missing out on the opportunity of rebound that comes with the bull market.
5. Don’t stop investing: ‘Buy the dip’ is usually the ringtone when the markets begin to go red but when the bear markets linger, the choristers of ‘Buy the dip’ suddenly become mute. The bear market presents you opportunities that you may never come across when the market turns bullish. There are still good assets to buy, the best time to invest is when the market is down.
Invest wisely, diversify your investments and get set for the next bull run.
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