When an index, such as the S&P 500, the Dow Jones Industrial Average, or even a single stock, falls 20% or more from a recent high over a long period, it is referred to as a bear market on Wall Street.
A bear market might come off as strange to people not vast in investment terms. What then is a Bear market, and why does it matter?
A bear market represents a deep and protracted market selloff and is an essential barometer of investor pessimism. It is described as a period when a stock or market index falls 20% or more from its recent high point.
S&P 500 — the stock market’s standard
S&P 500 is a popular stock exchange index. It is essentially a stock market index that tracks the performance of 500 big firms listed on American stock exchanges. It is one of the most widely followed equity indices. Also, and many consider it one of the most accurate depictions of the United States stock market.
S&P 500 is frequently used to gauge the health of stock markets not only in the United States but also globall, as many of the 500’s corporations have significant sway over global markets. The companies that make up this index considerably influence the market. Although, it is usually in an upward trend, which is suitable for investors.
S&P 500 price has dropped nearly 20% from its all-time highs at the start of the year. It signaled its first bear market since the pandemic market meltdown in March 2020. Notably, Dow has also lost more than 15% in 2022. With IT companies leading market drops in recent months, Nasdaq has also been in bear market territory. So far, it has dropped more than 28% this year.
Generally, the stock markets are easily influenced by positive and negative news since it affects the companies participating in the market and their profitability. This week is the seventh week in a row the stock has taken a plunge, the fourth time this has ever happened, and there is a buzz on Wall Street.
