The S&P 500 confirmed on Monday that it had fallen in a bear market, at least according to a popular metric. What exactly does this mean?
Here is a breakdown of bearers and bulls, and the criteria used to describe the up and down markets.
What happened?
The S&P 500 SPX,
fell 151.23 points, or 3.9%, on Monday to end at 3,749.63, its lowest close since January 29, 2021. More importantly, for market taxonomists, the end was a 21.8% below its record close of 4,796.56 on January 3rd. This is key, because a bear market is popularly defined as a drop of at least 20% over a recent peak.
I will see: The S&P 500 has just confirmed a bear market: what investors need to know
So does that mean a bear market started on Thursday? No. This is where it can get a little complicated.
According to the market dating criteria used by Dow Jones Market Data, the end of Thursday means the pandemic bullish market is over and the bear market started with the closing of the January 3 record. In other words, Thursday’s close, on the other hand, confirmed that the benchmark US capitalization has been in a bear market since almost the beginning of the year.
Undoubtedly, the criteria used to mark the bullish and bearish markets are arbitrary. There is no universal system. For more details on other approaches, take a look at this archived article that examined a controversy over the start date of the bullish market following the financial crisis that died in 2020 with the onset of the fall of the COVID pandemic market -19.
When does a bear market end?
The end of a bear market is confirmed when an asset rises at least 20% from a recent low.
In other words, the S&P 500 would not exit the bear market simply falling back to less than 20% from its Jan. 3 end.
And again, the end of the bear market and the start of the new bull market would go back to the minimum date.
Why bulls and bears?
There is a lot of market tradition around the origin of the terms bull and bass, which are still quite murky.
One of the most commonly used explanations is that a bull in the attack slides its horns upwards, while a bear strikes it down with its paws.
According to the people of Merriam-Webster, however, it was the bear that came first, making its appearance in terminology around the time of the South Sea bubble in the 18th century.
They pointed out a proverb that advised that it was not prudent to “sell the skin of the bear before it has caught the bear.”
In the 18th century, the term bear skin was used in the phrase “to sell (or buy) bear skin” and in the name “bear skin worker”, referring to one who sold the “bear skin”, said the dictionary site, noting that “bear skin” was quickly shortened to “bear” and applied to the shares sold by a speculator as well as to the speculator who he sold the shares.
According to this explanation, the term “ox” later referred to a speculator buying a stock in anticipation of its increase, a term that was seen as a “alter ego suitable for the bear,” according to Merriam-Webster. .