10 Signs You're in a Bear Market
Stocks are a-fallin', and your paycheck is bawling. You're in a bear market now!
Bull markets rule. When things are bullish, you can invest and expect to see returns rise. Up until recently, we were in one of the longest-running bull markets in stock market history.
Unfortunately, good markets don't last forever. Stocks can't go up all the darned time. When stocks start to fall and the economy tightens up, you end up with what's called a "bear market."
When you're in a bear market, stocks tend to lose more than they win. The economy gets a bit tougher. Bad as it may be though, bear markets are also temporary. To survive these ugly markets, you need to get conservative and avoid panic-selling.
In order to do that, though, you will need to know you're in a bear market to begin with. Here are the warning signs to watch for.
Stocks are taking a plunge...or are acting strangely.
If you invest in the stock market, chances are that you have at least a little interest in watching the performance of top market indexes. The reason why is simple: These indexes offer a great measure that shows you how well the market's performing.
Right before a bear market, stocks will stop climbing as quickly as they once did. They may also start to show high levels of volatility or sudden losses in certain sectors.
Back during the Great Recession, many stocks that were once considered blue chip collapsed. A consistent drop in stock values is the laymen's definition of a bear market. So, if you see this happen, you're in a bear market.
Scandals are rocking certain major industries.
Remember when banks started to fold due to major scandals? During most recessions and depressions, scandals break out about a major industry—most often finance.
When you're in a bear market, those bad corporate decisions start affecting Joe Everyman. This means the average person will notice, and will also start talking about it. If you hear more people talking about corporate gaffes and the biggest investment scandals in history a little more than usual, chances are you're living in bearish times.
People are losing their jobs.
Though most people don't really think about it, the stock market has a huge impact on peoples' livelihoods. When people don't invest, or when businesses tank, businesses need investors to prop them up.
When bear markets strike, investors pull out. When investors pull out, businesses can no longer afford to keep staff on. Then, layoffs happen in an effort to try and "trim the fat." It's just one of the ways people have been hit by a recession, even if they did everything right.
Take a look around you. Are your friends losing their jobs? If so, you're in a bear market.
The go-to investment strategy is to either sell, or stay put.
In a bull market, people are getting greedy. They'll go for speculative stocks and risky investments in a heartbeat. During tougher times, though, the very people who were speculative and growth-oriented start to panic.
Most people will start to sell stock during a bear market. Some even might check out of the investing world altogether. This is why many Millennials still remember the last recession and still refuse to invest.
Wise people, though, will typically stay put and continue finding ways to work with their investments. They're smart enough to realize that good news will eventually reveal itself.
News groups are saying you're in a bear market.
The guys at CNN and MSNBC aren't stupid. They are paid to be knowledgeable about stocks, and that includes knowing market conditions.
The easiest way to know if you're in a bull or bear market is to find out what economists are saying. If you hear people on the news saying that you're still in a bear market, listen to them.
Political turmoil is starting to get pretty crazy.
Though this isn't always the case, it's been a pretty solid pattern in most occasions. Bull markets tend to be their strongest during times of relative political stability. (Incidentally, they are also closely linked to Democrat-held presidencies.)
Bear markets often come alongside Republican rule, as well as times of serious political upheaval. The more divided the country is, the less likely it is that you'll have a good market.
The S&P 500 dropped more than 20 percent.
You may already know that bear markets mean that stocks plunge across the board, but there's a little more to the official definition than just looking at overall stocks.
The more specific definition of a bear market now looks at the performance of the S&P 500—an index made of the 500 best-performing stocks in the country. If it dives more than 20 percent in a short amount of time, you're officially in a bear market.
People are suddenly delaying retirement.
If you're just on the verge of retirement, watch out. You might not be able to fully retire during a bear market, simply because of how much money you need to retire. When times like this happen, stocks may not be able to provide the returns you need in order to coast along.
Some people may find themselves hit harder than others. As a result, fewer people retire during bear markets than bull markets.
Hedge fund managers have been warning others about an upcoming bear market for a year or so.
The people who are most prescient about the stock market are the ones who work in it. Not many people are more aware of stock trends and warning signs than hedge fund managers. They eat, sleep, and breathe the stock market.
You should start to get concerned when hedge fund managers are warning others of a bear market. They will often see the warning signs way earlier—and will move fast as a result.
Things are generally more unaffordable.
Major corporations tend to suffer pretty badly when they're in a bear market. This leads to prices rising, especially for things that are considered to be basic necessities. To make matters worse, lenders get stingy and interest rates rise, too!
If your wallet's been pretty tight as a result of these changes, there's a good chance you're in a bear market. The best thing to do now is to pull up your bootstraps and get ready until the market turns up again.