Are We in a “Bear Market”?
First of all, let’s define what a bear market is.
A bear market is used to describe when a stock index such as the S&P 500, the NASDAQ or the Dow Jones Industrial Average drop by 20 percent over a sustained period after a recent high.
The term “bear market” is used because bears hibernate, representing a market that has slowed down or ceased moving forward.
The term “bull market” is used to describe the opposite: a stock market charging forward.
This past Monday (June 13, 2022), the S&P 500 tumbled nearly 4%, and is now down over 21% from its January high.
The NASDAQ has been battered the entire new year so far and is down 33% year-to-date.
Meanwhile, the Dow Jones slipped 2.8% on Monday and is down 17% from its January high.
So, are we in a “bear market”? Although the Dow Jones has not yet sank below 20% to date, I would say YES we are in a bear market.
Reasons Why We’re in a “Bear Market”
Rising interest rates
The Russia-Ukraine War
China’s slowing economy
And soaring gas prices, to name a few
It’s tempting to sell out when the stock market tanks.
Riding out the waves can cause a bit of anxiety, but for most investors, the best course of action in a bear market is to just stay put.
I highly recommend you take advantage of one of the best investment strategies in times like these called: dollar-cost-averaging.
Dollar-cost-averaging is the practice of investing a fixed dollar amount (say $50 per month) on a regular basis, regardless of the share price.
And in fact, taking advantage of a diving market can be a great way to buy quality stocks at a substantial discount.