A bear market is usually a result of a struggling economy where there is unemployment, low disposable income, low productivity, and so on. Also, where there are natural disasters, wars, and crises. All these could cause the prices in a market to decline thereby causing a decline in the economy as a whole. A bear market usually shows a greater than 20% decline in the prices of goods in the market often followed by negative judgment from investors. In this article, we will see about ‘How Long Bear Markets Last?’.
How Long Bear Markets Last?
The best market could last for a while like some weeks or months or it could last for years. Two types of a Bear market determine the periods the Bear market lasts:
1. Cyclical Bear Market
2. Secular Bear Market
They will both be spoken about in this article.
- The Cyclical Bear Market stays for a period of some weeks to a couple of months. It lasts for an average of 21 months.
- The Secular Bear Market stays longer, for years. It is usually driven by long-term trends. It lasts for 10 to 20 years.
The period in which the Bear Market can stay does not have any time frame, that is, it can last for as short or as late. Nine months at least is the period for which a bear market lasts. There is the Cyclical Bear market and the Secular Bear Market. The Cyclical Bear Market had a short time frame. It lasts for a few months, while the Secular Bear Market is for a longer period, from five to twenty years.
The Secular Bear Market does not have a definite amount of time it lasts or the amount of time before it comes to an end. The same way stock prices rise and fall, the same way the secular beast market operates. Before a Bear Market can be declared over, there is always a lag.
More on Bear Market
The event of a bear market is usually short and cannot be avoided. At the mention of the phrase, investors tend to be scared. The period of a bear market is indeed a great opportunity to invest. A detailed description of the bear market and how it affects investments may be found below.
20% Drop In Investment Prices
One major characteristic of a Bear Market which shows that it has started is a decline in the price of investments, where the market index decreases by 20% or more. A bear market can occur in the whole market or just stock. This decrease sometimes does not happen at once, it is gradual. When investors as a result of the reduction in the price of stock start purchasing stocks because of the reduced price, the bear market could come to an end sooner. For some other investors, the news of a bear market is not good news. This is because they will begin to sell stocks at low prices.
Key traits of a bear market
- There’s a decline in stock value
- Fewer business profits are made
- Investors tend to be negative
Things You Should Know About Bear Market
- Bear markets are normal.
- Bear markets are mostly for a short period.
- An average Stocks experience average losses of 36% during down markets.
- There has been a seldom occurrence of the Bear Market since after world war II The
Cause of A Bear Market
One factor that influences a bear market is the situation of the economy. Where a country is characterized by unemployment, inflation, and general recession, a bear market could arise making those things worse and during this time, investors expect that profits will fall. This makes them sell off stock, thereby making the economy even lower.
A bear market stays for about 365 days and is less intense if compared to a bull market.
How Can One Invest During A Bear Market?
1. Increase the variety of your assets
During a bear market, having different assets in your portfolio is advised. It is a reasonable move to make during a bear market. Even though the prices of stocks fall, it will not affect the person since they have various assets, it helps to reduce your losses. Assets one can have included in their portfolio include:
– Stocks that pay a dividend
During the bear market period, bonds are worth it especially short-term bonds, as the prices for them increase unlike the prices for stocks that reduce.
2. Use the dollar-cost averaging
The dollar-cost averaging can be useful during the bear market period. It is when one is consistent in making investments with equal amounts of money instead of just throwing money out into stock with high risk. A bear market can be good for an investor whose attention is on possible gains than possible losses
Frequently Asked Questions
- On average, what is the period of a bear market?
About nine and a half months, 289 days to be precise, is the period at which a bear market lasts.
- How do I know a bear market will start?
One way is to observe when the federal reserve lowers rates in response to a slow economy.