Spending money can be fun. But his loss? If you watch large portions of your hard-earned savings disappear, lose money It could just be misery.
This is why the headlines announce the arrival of a alcohol market It was very annoying. Strictly speaking, a bear market is simply the parlance of Wall Street for a stock market drop of at least 20 percent. But this is not just a matter of numbers. The technical meaning of the term is not fully conveyed Human expertise.
Really, the fact that we are in a bear market means that a lot of people have done that previously I lost a lot of money. Until the momentum changes, as it will eventually, more wealth will go into the abyss. Panic makes matters worse. For those who incur heavy losses for the first time, a bear market can be dream-shattering, and a time of suffering and grief.
A much bigger problem could come, though, to the millions of people who couldn’t set aside enough money to lose in the stock market. a Recession It may be on the way. The United States has been in recession 14 percent of the time since World War II, according to data provided by National Bureau of Economic Researchthe semi-official entity that announces when recessions begin and stop in the United States.
with the Federal Reserve reinforced Record Fed Funds Rate 0.75 percentage point on Wednesday, predicting further increases to combat the rage inflation, We could definitely head into another recession. The Federal Reserve is also peeling Bonds and other securities it has amassed on its $9 trillion balance sheet to support the economy. In contrast to politics, it is now engaged in “quantitative tighteningThis will contribute to an economic slowdown.
Like bear markets, recessions have a dry technical definition. A recession is “a significant decline in economic activity that spreads throughout the economy and lasts more than a few months,” according to the Bureau of Economic Research.
But, basically, the recession amounts to this for millions of people, many of whom are completely indifferent to the volatility of the stock and bond markets: CareersMillions of families will be short of money and countless people will suffer setbacks physical And the Psychological health.
These are bleak things. If I can design a world that eliminates the misery of bear markets and stagnation, of course, I will.
But don’t wait for that to happen. The best we can do right now is realize that bear markets and their more worrying cousins, recessions, are Not Events that are truly rare or unexpected, even if the relative calm of the past decade might trick us into thinking so.
Despite the best efforts of policymakers, history shows that both bear markets and recessions are as common as severe storms in New York. Learn to live with them, just as you would with bad weather.
stock market situation
This year’s stock market slump has been painful. It remains difficult to predict what the future holds.
Stocks don’t always go up. The danger is always there.
This may sound like a cliched vision, yet it’s not fully understood until the market downturn gets hurt, only to be ignored or forgotten when the next boom rolls around.
Try to risk as much as you can afford. Long ago, I stopped investing in individual stocks and bonds, eliminating the risks of owning the wrong securities at the wrong time. Instead, I prefer low-cost, diversified index funds that enable me to hold a portion of the entire global stock and bond market. I reduced my equity exposure as I got older and my bond holdings increased. Bonds haven’t been doing well lately, but high-quality Treasuries and corporate bonds are still more stable than the stock market.
Before investing, try to set aside enough money to survive in an emergency, and keep it in a safe place. If you have already managed to accumulate some cash, I have described some of them reasonable places To preserve it, especially in this period of sharp inflation.
include I bondwhich is issued by Treasury Department And they pay interest at 9.62%. (The price is reset every six months). Also, money market funds are starting to pay higher interest after months of being stuck near zero. High-yield bank accounts, short-term Treasury bonds, and even some corporate bonds are also options.
Then, when it comes to investing, try to really think about the long-term, which means at least a decade, and preferably much longer. I am not going to put any money in the stock market that you may need to spend soon.
In the past, after big drops, the stock market always came back. Over 10 years, if you invested money in the entire S&P 500, you would lose money only 6 percent of the time. Over the course of 20 years, you will never lose money.
Above all else, be prepared for market volatility. It’s clear at the moment that they don’t always get up. In fact, history shows that big dips are a normal part of investing.
Why is modern history deceptive?
Bull markets are more fun than bears, and it’s mostly the predominant experience for people who started investing after March 9, 2009.
This was the day the S&P 500 bottomed out after the bear market plunged 57 percent. This terrible drop occurred in the financial crisis that began in 2007. What turned the market upside down was the Federal Reserve, which cut interest rates to nearly zero, bought trillions of dollars in bonds and started a bull market in stocks that lasted nearly 11 years.
That glorious time for the S&P 500 ended on February 19, 2020, near the start of the Covid-19 pandemic. There was a brief bear market until the Federal Reserve intervened again, and on March 23, barely a month later, another bull market began, lasting nearly two years.
If that’s all you know, this year’s bear market may seem like a rare aberration, a random dip in a world where market gains are the norm.
But I think that would be a misreading of history. Data provided by Howard Silverblatt, chief index analyst at S&P Dow Jones Indices, provides a broader perspective.
Since 1929, the US stock market has been in a bear market about 24% of the time. Note that in this reliable accounting, a bear market starts on the first day of dips that become short 20 percent. According to S&P Indexes, the S&P 500 has been in a bear market since January 3, when the decline began.
You might argue with this definition of a bear market, but the main point is irrefutable: major market dips have always been an integral part of investing, and if you’re going to put your money into stocks, you need to be prepared for it.
Recessions happen often
We are in a bear market. We may be in a recession right now, but the Bureau of Economic Research isn’t even trying to make real-time recession calls.
In the past, it has declared the beginning and end of recessions somewhere “between four and 21 months” after these events occurred. As the bureau explains: “There is no set time rule. We wait long enough that the existence of the top or bottom is not in doubt, and that we can date an exact peak or bottom.”
Economists are good at many things, but Anticipate downturns not of them. Recessions are very hard to anticipate, Ellen Gaskeya major economist Fixed Income PGIM, in an interview on Tuesday. “Even if you get one right, you probably won’t get the next.”
But we have accurate readings of the dates of previous recessions going back to 1854. Using data From the office website, I made some calculations with the help of Mehta’s descendanta statistical. I’ve found that since 1854, the United States has been in a recession 29 percent of the time. From 1945 through 2020, it was in recession only 14% of the time.
But consider this finding, drawn from data and produced by Mr. Mehta: On any given day in the postwar period, the chance that the United States would be in recession or within two years was 46 percent.
What does this tell us about the prospects of the United States falling into a recession soon? Not much, but the possibilities Always Reasonably high, it is wise to prepare.
However, my fallible estimation is that it would be a pleasant surprise if we did. no stagnation. A sharp rise in interest rates, a rise in energy prices and a sharp decline in stock prices have often been associated with a recession.
But even if none of these factors matter, it’s still appropriate for recessions to occur at an alarming pace. The Fed tried to smooth the economic cycle, but “Fantastic moderation,” The term was popularized in 2004 by Ben S. Bernanke, the former Federal Reserve chairman, is evident by his absence.
Turmoil is a constant recurrence in markets and the economy. It is easy to tell when financial and economic turmoil is common but there is no doubt that it will be forgotten again. This is how it is.
By the same token, these trying times will not last. Knowing this may not help much if you are already struggling.
But if the future looks like the past, it is very likely that the economy will grow in the long run and that The financial markets will yield good returns for impatient and diversified investors. Understanding that periods of contraction, even severe ones, are an inevitable part of life, may help you avoid some pain in the future.