Page 25 - ARUBA TODAY

BUSINESS Thursday 12 March 2020
A25

A look at what happens when stocks enter a bear market

By ALEX VEIGA WHEN WAS THE LAST TIME
AP Business Writer WE HAD A BEAR MARKET?
Wall Street's staggering skid The last bear market for
that began less than three the S&P 500 ran from Oct.
weeks ago has pulled the 9, 2007 through March 9,
Dow Jones Industrial Aver- 2009. The index fell 56.8%.
age into what's known as a in that 17-month period
bear market. as the U.S. housing down-
After a string of sharp loss- turn and mortgage crisis
es, the Dow has now fallen erupted, triggering a credit
more than 20% from its last crunch.
peak on February 12. ___
The S&P 500, the index most HOW LONG DO BEAR MAR-
investors pay attention to, KETS LAST AND HOW DEEP
moved within striking dis- DO THEY GO?
tance of its own bear mar- On average, bear markets
ket Wednesday, as did the have lasted 14 months in
Nasdaq. Both indexes are the period since World War
in a correction, down at A board above the floor of the New York Stock Exchange shows the closing number for the Dow II, while market corrections
least 10% from their most Jones Industrial Average, Wednesday, March 11, 2020. have lasted an average of
recent all-time highs. Associated Press five months. The S&P 500 in-
Here are some common dex has fallen an average
questions asked about The major U.S. stock index- TORS? drop in crude oil prices has of 33% during bear markets
bear markets and correc- es entered a correction The outbreak of the coro- further dimmed the overall in that time. The biggest de-
tions and what they mean this month amid mounting navirus that originated in outlook for corporate prof- cline since 1945 occurred in
for average investors: fears about the impact that China has quickly grown its this year and next. Com- the 2007-2009 bear market.
___ the coronavirus outbreak into a pandemic that is pany profits tend to be the History shows that the faster
HOW IS A BEAR MARKET could have on the global threatening major sec- biggest driver of stock mar- an index enters into a bear
DIFFERENT FROM A MARKET economy and company tors of the global econo- ket gains. market, the shorter they
CORRECTION? earnings growth. A oil mar- my, stoking fear that the ___ tend to be. Historically,
A correction is Wall Street's ket price war this week that U.S. and other economies HOW OFTEN DO MARKET stocks take 270 days to fall
term for an index like the led analysts to lower their could be tipped into a re- CORRECTIONS BECOME into a bear market. When
S&P 500, the Dow Jones In- profit forecasts for energy cession. BEAR MARKETS? the S&P 500 has fallen 20%
dustrial Average, or even companies fueled more Many companies, includ- In the S&P 500, there have at a faster clip, the index
an individual stock, that's selling on Wall Street. ing airlines, cruise operators been 23 corrections since has averaged a loss of 26%,
fallen 10% or more from a All told, the Dow fell and big consumer technol- 1945 and 12 bear markets, Stovall said.
recent high. A bear market 1,464.94 points Tuesday ogy manufacturers, have not including the current ___
occurs when the index or to 23,553.22. That's 20.3% warned their earnings will near-bear market, said WHAT ARE THE SIGNS THAT
stock falls 20% or more from below its record close of take a hit this year due to Sam Stovall, chief invest- A CORRECTION OR A BEAR
the peak for a sustained 29,551.42 on Feb. 12. The the economic fallout from ment strategist for CFRA. MARKET HAS ENDED?
period of time. S&P 500 index slid 140.85 the outbreak. That works out to correc- Generally, investors look for
Corrections are common points to 2,741.38. It's now Investors remain uncertain tions becoming bear mar- a 20% gain from a low point
during bull markets, and down 19% from its high of over whether action taken kets a little less than 35% of as well as sustained gains
are considered normal and 3,386.15 on Feb. 19. The by the Federal Reserve and the time. over at least a six-month
even healthy. They allow Nasdaq dropped 392.20 the Trump administration to Should the S&P 500 enter period.
markets to remove specu- points to 7,952.05, or 19% shield the economy will be a bear market before April On average, bull markets
lative froth after a big run- below its peak of 9,817.18 effective or arrive quickly 11, it would mark the fastest last 4.5 years. In terms of the
up and give investors a on Feb. 19. enough to prevent wide- drop of 20% by the index on S&P 500, the current bull
chance to buy stocks at ___ spread economic pain. record, Stovall said. market has been going on
lower prices. WHAT'S BOTHERING INVES- More recently, a sharp ___ for almost 11 years.q