Interesting article by Robert Shiller in the New York Times recently. Basically, the market has come to define a correction as a 10% fall in stocks, and a bear market is a 20% fall in stocks, from their highs.
Well first, those are relatively new terms. Not new terms, but new definitions of those terms, really dating back to the mid 1980s. That’s when I started college, so I didn’t know that the current definitions didn’t exist before then.
Also, there’s nothing scientific about them, there’s nothing particularly special about the 10% for correction or 20% for bear market. People have just been using that, and it doesn’t actually mean anything.
Really, when you think about it, if the market is down 19% or 21%, one’s a bear market and one’s not. It doesn’t really make a big difference, does it? Anyway, in December the S&P 500 was down 19.8% from its recent high and so it didn’t really hit the definition of a bear market, although I thought we had on Christmas Eve. Anyway, interesting information. It’s always good. I love reading the paper.
My name is Mike Garry, and my company is Yardley Wealth Management. We are a fiduciary, fee-only financial planning, and wealth management firm in Newtown, Pennsylvania. (That’s in Bucks County). If you’d like to talk about this or anything else, please reach out: 267-573-1019, [email protected] or @michaeljgarry
If you’d prefer to watch the associated video, please go to Youtube and subscribe to our channel: https://www.youtube.com/channel/UCe-ma6bk1O68Tmb2sDakZpA?view_as=subscriber
If you would like our other content, about one time per month, and usually a little longer, please subscribe to our E-Newsletter: https://yardleywealth.net/newsletter-sign-up/