Market downturns can be painful, scary experiences. But what differentiates a bear market from a correction or other type of downturn? In this video, Ken Fisher dives into the details of bear markets.
Ken Fisher describes how a bear market is generally accepted to be a broad index market drop of approximately 20% or more over a sustained period of time. Bear markets can occur in stock indexes, bond indexes, commodity indexes and more. Generally, bear markets don’t refer to a single stock’s performance, but rather broader indexes or chunks of the market—like US stocks or European stocks. Generally, when you see drops in just a single stock or small subsections of the market, they are just examples of normal market volatility, not a bear market.
Ken Fisher says some investors confuse corrections and bear markets. They can be differentiated by looking at the length and severity. Ken Fisher defines a correction as a shorter, sentiment-driven drop that is often between approximately 10 – 20%. Compare that to a bear, which is longer, fundamentally-driven and generally a deeper drop. While corrections and other forms of volatility can certainly be impactful or alarming events, bear markets are much more significant in length and strength.
If you want to learn more about bear markets or other aspects of stock market cycles from Ken Fisher and Fisher Investments, subscribe to Fisher Investments’ YouTube channel today.
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