"Is This a Stock Market Correction or a Bear Market?"
I don't think I had ever known the technical definitions of a pull back, a correction and a bear market. So this post delving into them and what the market appears to be doing right now was enlightening.
A pullback is a market drop of 5-10% and is very short term. It is a dip from a recent high during an ongoing bull market while upward momentum is still intact, and is a normal adjustment to a market cycle.
The market is in “correction phase” after a drop between 10-20% and can last a few months. These moves are typically met with higher volatility. Corrections can be violent as investors’ fear levels rise and panic selling may hit the market.
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A bear market occurs after a drop of 20+% over at least a two-month time frame. In a bear market, investor confidence has been shattered and many investors will sell their stocks for fear of further losses. Trading activity tends to decrease as do dividend yields.
Bear markets tend to become vicious cycles when rallies are sold and not bought This happened in 2000 and 2007 and can typically be seen on charts as the market makes lower lows and lower highs. Bear markets tend to occur in the contraction phase of the business cycle and last, on average, approximately 16 months.
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