The New York Stock Exchange (NYSE) 30 blue chip stocks benchmark Dow Jones industrial average closed down more than 20 percent from its high last month, entering the bear market and ending the bull market that ran for more than a decade. The 11 years of bull market which is considered as one of the greatest economic development in United States financial history, weathered a European debt crisis and survived President Trump’s trade war with China, is dead due the global pandemic novel coronavirus.
On Wednesday, Dow skids 5.9 percent, completing a decline of 20.3 percent from a high reached on Feb. 12 and entered a bear market. That fall threshold of 20 percent from a high suggests a fundamental change in investors ‘mindset of the economy and could be a forerunner to a recession.
What is a bear market? A bearish market is when there’s a decline in the market The S&P 500 fell down 4.9 percent on Wednesday, 19 percent under its current high, as the market entered a domain where prices for stocks tend to fall rather than rise, traders and investors seek the shelter of safer assets and fears of falling profits could prompt businesses to reduce investment and cut payroll. The reason of this sudden fall in stock prices was the pandemic of novel coronavirus outbreak that has spread swiftly across the globe, disrupting supply chains from Asia to Europe to the United States and forcing isolations and travel restrictions that have ground entire countries trades to a shutdown. The coronavirus pandemic, which has infected tens of thousands of people in more than 100 countries, has sent the market downward over the past few weeks regardless of occasional reversals on of promising news. This also affected the Bear market.
While the terminology might seem somewhat out of date, the bull market and bear market are a figurative way of describing the changing response among investors. “It seems to refer to the mindset of the market and its investors,” said a Yale economics professor Robert Shiller
The plunge into bear market territory is a significant moment for markets, which often operate as something of an experiment in mass psychology. Although traders and investors are unlikely to straight away change their trading and investing strategies after Wednesday, the 20 percent marker chance, but widely agreed upon this carries symbolic value. Bear market can also sign economic recessions such as the 1929 stock market crash that came before the Great Depression, or the last bear market that began in 2007 as the United States financial system declined plunge into a economic crisis. A bull market is one of the best sign of traders and investors’ confidence in the fundamental strength of the economy, and their faith that business profits and consumer spending are vigorous and will continue to grow. For many, it also signals America’s continued ascendancy in the global economy, and when a bull market swerves off course, investors be likely to panic about the future. The latest bull market grew out of the ashes of the 2008 financial crisis, with the S&P 500 commencement in March 2009, and rising over 300 percent during this period.