NEW YORK — The rebound in the United States (US) stock market in recent weeks has analysts and investors wondering if the deep decline of 2022 is over, but not everyone on Wall Street agrees how one can spot an ending bear market or a new bull market market the market.
Stocks rallied on better-than-expected corporate earnings and bets that the worst of rising inflation may be behind us. The Nasdaq’s about 0.6 percent drop on Thursday (Aug. 11) sent the tech-heavy index up 20 percent from its recent low on June 16, while the S&P 500 has also rallied in recent weeks, and is now up 15 percent rose from its recent low in June.
The recent gains led analysts at Bespoke Investment Group to say Thursday morning that the Nasdaq is emerging from its recent bear market, even though the index is about 21 percent below its record high from last November and the stock market is still valued at trillions of dollars . lost.
On Wall Street, the terms “bull” and “bear” are often used to describe broad uptrends or downtrends in asset prices.
Both indices are generally considered bear markets in 2022, but not all analysts define bull or bear markets in the same way, and many investors use the terms loosely.
“We could write for hours about the semantics of bull and bear markets,” Bespoke wrote in its poll, noting that it was confirmed that a new bull market had begun on June 16.
The Merriam-Webster dictionary defines a bull market simply as “a market in which the value of a security or commodity continues to rise.”
Some investors define a bear market more precisely as a stock or index falling at least 20 percent from its previous high, with a high defining the beginning of a bear market that is only recognized in hindsight after a decline of at least 20 percent.
Similarly, some define a bull market as a 20 percent rise from a previous low, and according to this metric used by Bespoke, the Nasdaq could now be seen as the start of a new bull market.
The Securities and Exchange Commission states on its website, “A bull market generally occurs when a broad market index is up 20 percent or more for at least two months.”
S&P Dow Jones Indices, which manages the S&P 500 and Dow Jones Industrial Average, has an even more nuanced definition of a bull market.
A 20 percent or more decline from the high followed by a 20 percent rise from the low would still leave the index below the previous high, a situation S&P Dow Jones Indices analyst Howard Silverblatt calls “bullish.” rally in a bear market”.
Analysts warn against over-reliance on backward-looking definitions of market cycles, which do little to capture current sentiment or predict where stocks will head in the future.
Factors such as the speed at which the market rises or falls and how much the average stock has changed contribute to whether investors view a major move as a turning point in sentiment or a short-term disruption to an existing bull or bear market.
Investors can only be sure they are in a new bull market if a new record high is set. At that point, the previous low would mark the end of the bear market and the start of a new bull market, S&P says. Dow Jones indices.
For example, during the bear market caused by the 2008 financial crisis, the S&P 500 rose more than 20 percent from its November 2008 low, raising hopes that the stock market slump was over. But in March 2009, the S&P 500 fell another 28 percent to even lower lows.
It wasn’t until the all-time high was hit in March 2013 that investors could say with certainty that a new bull market was born four years earlier.
“We go back and say, ‘OK, when did the market bottom?'” Silverblatt said. “Then the bear would end and the bull would begin.” Reuters