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BUSINESS Saturday 21 May 2022
A bear market is hitting Wall Street. Here’s what that means

By STAN CHOE and ALEX day at least 20% down from better returns. vestors less willing to pay stocks have provided over
VEIGA its peak. Earlier this month, the Fed elevated prices for stocks, the long term.
AP Business Writers The Nasdaq is already in signaled additional rate in- which are riskier than While dumping stocks
NEW YORK (AP) — Inves- a bear market, down 31% creases of double the usual bonds, when bonds are would stop the bleeding, it
tors on Wall Street need a would also prevent any po-
place to hide. tential gains.
The stock market’s skid this Many of the best days for
year has pulled the S&P 500 Wall Street have occurred
within the grasp of what’s either during a bear mar-
known as a bear market. ket or just after the end
Rising interest rates, high of one. That includes two
inflation, the war in Ukraine separate days in the mid-
and a slowdown in China’s dle of the 2007-2009 bear
economy have caused in- market where the S&P 500
vestors to reconsider the surged roughly 11%, as well
prices they’re willing to pay as leaps of better than 9%
for a wide range of stocks, during and shortly after the
from high-flying tech com- roughly monthlong 2020
panies to traditional auto- bear market.
makers. Advisers suggest putting
The last bear market hap- money into stocks only if it
pened just two years ago, won’t be needed for sev-
but this would still be a first eral years.
for those investors that got The S&P 500 has come back
their start trading on their from every one of its prior
phones during the pan- bear markets to eventually
demic. For years, thanks in rise to another all-time high.
large part to extraordinary The down decade for the
actions by the Federal Re- stock market following the
serve, stocks often seemed Pedestrians walk by the New York Stock Exchange, Wednesday, May 18, 2022 in New York. 2000 bursting of the dot-
to go in only one direction: Associated Press com bubble was a noto-
up. Now, the familiar rally- riously brutal stretch, but
ing cry to “buy the dip” af- stocks have often been
ter every market wobble is from its peak of 16,057.44 amount are likely in up- suddenly paying more in in- able to regain their highs
giving way to fear that the on Nov. 19. The Dow Jones coming months. Consumer terest thanks to the Fed. within a few years.
dip is turning into a crater. Industrial Average is more prices are at the highest Critics said the overall stock
Here are some common than 16% below its most re- level in four decades, and market came into the year HOW LONG DO BEAR MAR-
questions asked about cent peak. rose 8.3% in April compared looking pricey versus his- KETS LAST AND HOW DEEP
bear markets: The most recent bear mar- with a year ago. tory. Big technology stocks DO THEY GO?
ket for the S&P 500 ran from The moves by design will and other winners of the On average, bear markets
WHY IS IT CALLED A BEAR February 19, 2020 through slow the economy by mak- pandemic were seen as have taken 13 months to
MARKET? March 23, 2020. The index ing it more expensive to the most expensive, and go from peak to trough
A bear market is a term fell 34% in that one-month borrow. The risk is the Fed those stocks have been and 27 months to get back
used by Wall Street when period. It’s the shortest bear could cause a recession if it the most punished as rates to breakeven since World
an index like the S&P 500, market ever. raises rates too high or too have risen. War II. The S&P 500 index
the Dow Jones Industrial quickly. But the pain is spreading has fallen an average of
Average, or even an indi- WHAT’S BOTHERING INVES- Russia’s war in Ukraine has widely, with shares of Target 33% during bear markets in
vidual stock, has fallen 20% TORS? also put upward pressure and other retailers slumping that time.
or more from a recent high Market enemy No. 1 is inter- on inflation by pushing up hard this week after report- The biggest decline since
for a sustained period of est rates, which are rising commodities prices. And ing weaker-than-expected 1945 occurred in the 2007-
time. quickly as a result of the worries about China’s profits. 2009 bear market when the
Why use a bear to repre- high inflation battering the economy, the world’s sec- Stocks have declined al- S&P 500 fell 57%.
sent a market slump? Bears economy. Low rates act ond largest, have added most 35% on average History shows that the faster
hibernate, so bears rep- like steroids for stocks and to the gloom. when a bear market co- an index enters into a bear
resent a market that’s re- other investments, and Wall incides with a recession, market, the shallower they
treating, said Sam Stovall, Street is now going through SO, WE JUST NEED TO AVOID compared with a nearly tend to be.
chief investment strategist withdrawal. A RECESSION? 24% drop when the econ- Historically, stocks have tak-
at CFRA. In contrast, Wall The Federal Reserve has Even if the Fed can pull off omy avoids a recession, en 251 days (8.3 months)
Street’s nickname for a made an aggressive pivot the delicate task of tamp- according to Ryan Detrick, to fall into a bear market.
surging stock market is a away from propping up fi- ing down inflation with- chief market strategist at PL When the S&P 500 has fall-
bull market, because bulls nancial markets and the out triggering a downturn, Financial. en 20% at a faster clip, the
charge, Stovall said. economy with record-low higher interest rates still index has averaged a loss
The S&P 500 index was rates and is focused on put downward pressure on SO I SHOULD SELL EVERY- of 28%.
down 1.9% in Friday after- fighting inflation. stocks. THING NOW, RIGHT? The longest bear market
noon trading, putting it The central bank has al- If customers are paying If you need the money now lasted 61 months and end-
20.3% below its high set on ready raised its key short- more to borrow money, or want to lock in the losses, ed in March 1942 and cut
Jan. 3. term interest rate from its re- they can’t buy as much yes. Otherwise, many advis- the index by 60%.
For many investors, the cord low near zero, which stuff, so less revenue flows ers suggest riding through month period. It took less
bear market would be- had encouraged investors to a company’s bottom the ups and downs while than three weeks for stocks
come official if the S&P 500, to move their money into line. Stocks tend to track remembering the swings to rise 20% from their low in
Wall Street’s main barom- riskier assets like stocks or profits over time. are the price of admission March 2020.q
eter of health, finishes the cryptocurrencies to get Higher rates also make in- for the stronger returns that