What Is a 'Bear Market?'
2022-06-15
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1A major measure of the U.S. stock market, the S&P 500 Index, decreased 3.9 percent Monday.
2That means the index has fallen about 22 percent below its recent high in early January.
3When an index falls 20 percent or more from a recent high for a continued period, investors call it a bear market.
4Bears usually sleep, or hibernates, for the whole winter.
5So, bears represent a market that is withdrawing, said Sam Stovall.
6He is a top investment expert at CFRA, a market research business.
7Investors call a rising stock market a bull market because bulls move forward, Stovall explained.
8Other major market indexes in the U.S., including the Dow Jones Industrial Average and Nasdaq, all decreased.
9Bitcoin, a form of digital money, fell below $23,000 on Monday.
10That is down from nearly $68,000 for one bitcoin late last year.
11On Tuesday, stock market indexes generally went down across Europe and Asia.
12Investors are worried over inflation, high interest rates, a slowdown in China's economy and the war in Ukraine.
13Investors are concerned that the U.S. Federal Reserve will have to raise interest rates a lot to control rising inflation.
14The U.S. central bank controls an important interest rate that affects banks and influences other rates.
15Increasing interest rates slow the economy by making it more costly to borrow money.
16The risk is the Federal Reserve could cause a recession if it raises rates too high or too quickly.
17Other central banks, including the Bank of England, have been raising rates as well.
18The European Central Bank said it will do so next month and in September.
19Last month, the Federal Reserve signaled that more rate increases are coming as inflation is at its highest level in 40 years.
20Russia's war in Ukraine has added pressure on prices by driving up the cost of oil and food.
21The slowdown of China's economy, the world's second largest, has added to concerns about financial issues.
22Even if the Federal Reserve could control inflation without a downturn in the economy,
23higher interest rates still put downward pressure on stock prices.
24If people are paying more to borrow money, they buy fewer goods.
25It means businesses make smaller profits or lose money.
26 Lower profits drive down a company's stock price.
27Critics are saying stock prices were too high before the downturn.
28Big technology stocks and others that gained a lot during the pandemic have since lost value.
29Ryan Detrick is chief market expert at LPL Financial, an investment advisory business.
30He said if there were a recession along with a bear market, stock prices could decrease an additional 10 percent.
31On average, bear markets have taken 13 months to go from peak to trough, or from the highest to the lowest points.
32They also have taken about 27 months to get back to the break-even point since the 1940s.
33The S&P 500 index has fallen an average of 33 percent during bear markets during that period.
34The biggest decline since 1945 happened in the 2007-2009 bear market when the S&P 500 fell 57 percent.
35And the longest bear market lasted 61 months and ended in March 1942.
36It cut the index by 60 percent.
37Generally, investors look for a 20 percent gain from a low point and continued gains over at least a six-month period.
38But after the 2020 bear market, it took less than three weeks for stocks to rise 20 percent from their low in March of that year.
39I'm Faith Pirlo. And I'm Mario Ritter, Jr.
1A major measure of the U.S. stock market, the S&P 500 Index, decreased 3.9 percent Monday. That means the index has fallen about 22 percent below its recent high in early January. 2When an index falls 20 percent or more from a recent high for a continued period, investors call it a bear market. 3Bears usually sleep, or hibernates, for the whole winter. So, bears represent a market that is withdrawing, said Sam Stovall. He is a top investment expert at CFRA, a market research business. 4Investors call a rising stock market a bull market because bulls move forward, Stovall explained. 5Other major market indexes in the U.S., including the Dow Jones Industrial Average and Nasdaq, all decreased. Bitcoin, a form of digital money, fell below $23,000 on Monday. That is down from nearly $68,000 for one bitcoin late last year. 6On Tuesday, stock market indexes generally went down across Europe and Asia. Investors are worried over inflation, high interest rates, a slowdown in China's economy and the war in Ukraine. 7What is worrying investors? 8Investors are concerned that the U.S. Federal Reserve will have to raise interest rates a lot to control rising inflation. The U.S. central bank controls an important interest rate that affects banks and influences other rates. 9Increasing interest rates slow the economy by making it more costly to borrow money. The risk is the Federal Reserve could cause a recession if it raises rates too high or too quickly. 10Other central banks, including the Bank of England, have been raising rates as well. The European Central Bank said it will do so next month and in September. 11Last month, the Federal Reserve signaled that more rate increases are coming as inflation is at its highest level in 40 years. 12Russia's war in Ukraine has added pressure on prices by driving up the cost of oil and food. The slowdown of China's economy, the world's second largest, has added to concerns about financial issues. 13Do we need to avoid a recession? 14Even if the Federal Reserve could control inflation without a downturn in the economy, higher interest rates still put downward pressure on stock prices. 15If people are paying more to borrow money, they buy fewer goods. It means businesses make smaller profits or lose money. Lower profits drive down a company's stock price. 16Critics are saying stock prices were too high before the downturn. Big technology stocks and others that gained a lot during the pandemic have since lost value. 17Ryan Detrick is chief market expert at LPL Financial, an investment advisory business. He said if there were a recession along with a bear market, stock prices could decrease an additional 10 percent. 18How long does a bear market last? 19On average, bear markets have taken 13 months to go from peak to trough, or from the highest to the lowest points. They also have taken about 27 months to get back to the break-even point since the 1940s. 20The S&P 500 index has fallen an average of 33 percent during bear markets during that period. The biggest decline since 1945 happened in the 2007-2009 bear market when the S&P 500 fell 57 percent. And the longest bear market lasted 61 months and ended in March 1942. It cut the index by 60 percent. 21How do investors know when a bear market has ended? 22Generally, investors look for a 20 percent gain from a low point and continued gains over at least a six-month period. 23But after the 2020 bear market, it took less than three weeks for stocks to rise 20 percent from their low in March of that year. 24I'm Faith Pirlo. And I'm Mario Ritter, Jr. 25Stan Choe and Alex Veiga reported this story for the Associated Press. Hai Do adapted it for VOA Learning English. 26We want to hear from you. Does news of the stock markets affect you? Write to us in the Comments section, and visit our Facebook page. 27___________________________________________________________________ 28Words in This Story 29break-even -adj. when costs and income are equal; the point where a profit is possible, especially when talking about stocks