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Bear market could be on the horizon — what that means

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What’s a bear market? And other things you should know about where the economy might be heading.
Investors on Wall Street need a place to hide. The stock market’s skid this year has pulled the S&P 500 close to what’s known as a bear market. Rising interest rates, high inflation, the war in Ukraine and a slowdown in China’s economy have caused investors to reconsider the prices they’re willing to pay for a wide range of stocks, from high-flying tech companies to traditional automakers. The last bear market happened just two years ago, but this would still be a first for those investors that got their start trading on their phones during the coronavirus pandemic. For years, thanks in large measure to extraordinary actions by the Federal Reserve, stocks often seemed to go only in one direction: up. Now, the familiar rallying cry to “buy the dip” after every market wobble is giving way to fear that the dip is turning into a crater. A bear market is a term used on Wall Street when an index like the S&P 500, the Dow Jones Industrial Average or even an individual stock has fallen by 20% or more from a recent high for a sustained period of time. Why use a bear to represent a market slump? Bears hibernate, so bears represent a market that’s retreating, said Sam Stovall, chief investment strategist for the investment research firm CFRA. In contrast, Wall Street’s nickname for a surging stock market is a bull market because bulls charge, Stovall said. The most recent bear market for the S&P 500 ran from Feb. 19, 2020, through March 23, 2020. The index fell 34% in that one-month period, which was the shortest bear market ever. Market enemy No. 1 is interest rates, which are rising quickly as a result of the high inflation battering the economy. Low rates act like steroids for stocks and other investments, and Wall Street is now going through withdrawal.

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