馃攳
What It Takes for a Bear Market to Turn Around | WSJ - YouTube
Channel: unknown
[0]
(tranquil ambient music)
- When stocks
[1]
take a steep drop,
[2]
investors can come face to face
[3]
(bear growls)
with a bear market.
[6]
This is one they
encountered in March, 2020.
[8]
- It's been fierce and fast and ferocious,
[12]
the selling has been
[12]
and that's what really has
caught everyone off guard.
[15]
- Bear markets tell you
[16]
that the stock market
has fallen quite a bit.
[19]
And it's an indicator
[20]
that major indexes are
significantly off their highs.
[23]
And it's a sign
[25]
that people are pretty fearful
about the market right now.
[27]
(bear growls)
- But just like
[28]
(upbeat ambient music)
facing an actual bear,
[30]
some analysts say the best thing to do
[31]
when a bear market is
approaching is to stay calm
[34]
and not make any sudden moves.
[36]
(paper shuffles)
Here's how markets
[37]
make their way into bear territory.
[39]
And what has helped turn
them around in the past.
[45]
Stocks enter a bear market
(soft scribbling)
[47]
when they lose at least 20% of their value
[50]
from a recent high.
[51]
(tranquil ambient music)
Let's look back
[52]
at the 2020 chart.
[53]
You can see when the market
started to fall in February,
[56]
it entered a bear market here
just under a month later.
[60]
The term is a shorthand
way for Wall Street to mark
[63]
when stocks have taken a tumble,
[65]
a sign that investors are
anxious about the future
[67]
and moving away from risky assets.
[69]
- There's a number
[70]
of things that can make
investors more risk averse.
[72]
One, they can grow concerned
about how stocks are valued
[76]
and say, is this stock really
worth what I think it's worth,
[81]
or worth the premium
that I'm putting on it?
[84]
Have valuations run up too far, too fast?
[86]
- [Narrator] This was a factor
in a bear market in 2001
[89]
when a bursting market bubble
drove down stock values.
[93]
- I believe I was asked
about the markets today.
[95]
I'm sorry people are losing
value in their portfolios.
[99]
- Another really important
factor is the economy.
[102]
Often bear markets
[103]
have been affiliated
with economic recessions.
[106]
So that's one thing that can
really put investors on edge.
[109]
- [Narrator] Recessions have accompanied
[111]
nine of the last 17 bear markets.
[113]
And while one doesn't
necessarily cause the other,
[116]
problems in the economy
can be a major factor
[119]
in bringing stocks down.
[120]
High inflation contributed
[122]
to one of the longest bear
markets in history in the 1970s.
[125]
Other things that can lead to bear markets
[127]
are big events that
threaten corporate profits.
[130]
For example, that drop in
stocks we looked at from 2020
[133]
was caused by the beginning
of the coronavirus pandemic.
[136]
When investors were anxious
[137]
about the effect the virus
might have on the economy.
[141]
- Often investors start to get concerned
[143]
about the levels of uncertainty out there,
[145]
and they decide, it's time
for me to dump stocks.
[148]
That can drive prices down.
[150]
- [Narrator] So to review,
a bear market occurs
[153]
when stocks have dropped
by a certain amount,
[155]
but what turns them around?
[157]
(bell rings)
[159]
Stock prices depend on
a variety of factors
[161]
that can change quickly or slowly.
[164]
- There's the fed, there's the economy,
[166]
there's US corporations,
there's consumer behavior,
[169]
you have to take into
account all of those things.
[172]
- [Narrator] For the bear market
[172]
(tranquil ambient music)
to go back into hibernation,
[174]
stocks need to rebound by at least 20%
[176]
from their bottom point,
flipping into a bull market.
[180]
The S&P 500 on average
spends about 142 trading days
[184]
from the time it enters a bear
market to the time it exits.
[188]
This chart shows five
recent times the S&P 500
[191]
went into a bear market,
[192]
starting from when the
market began to decline,
[195]
to when it made a full recovery.
[196]
After stocks started falling in 2000
[199]
when the.com bubble burst,
[200]
the index didn't hit bottom
for over a year and a half,
[203]
and it took until 2007 to
swing back to where it started.
[208]
- Part of the reason that
did take so long to recover
[211]
was just the sheer magnitude
of the boom in stock prices,
[215]
which made the bust just so, so dramatic.
[219]
And it took years for us
to reclaim those highs.
[222]
- [Narrator] But the 2020 bear market
[223]
turned around in a record amount of time.
[226]
It hit bottom after just 23 trading days
[228]
and only took 126 days
to swing to a new high.
[232]
One of the biggest reasons for the rebound
[234]
was the federal reserve
and government stimulus.
[237]
Stimulus checks and lower interest rates
[239]
helped increase spending,
[241]
indicating to investors that
companies could make it through
[243]
with government support.
[245]
Measures like this also
helped bring stocks up
[247]
in other bear markets,
[248]
(bell chiming)
like after the market crash
[249]
in the late 2000s,
[251]
though the recovery happened
over a longer period of time.
[254]
- To break the adverse feedback loop,
[256]
it is essential that we
continue to compliment
[258]
fiscal stimulus with
strong government action
[260]
to stabilize financial
institutions and financial markets.
[264]
- When the fed steps in
to provide more stimulus,
[267]
historically that's
helped the stock market.
[269]
- [Narrator] Other things that economists
[271]
and analysts say can make
investors more confident
[273]
and bring up stock values
[275]
are corporate growth and
strong employment numbers.
[278]
- When people feel good
about spending money
[280]
or they're more optimistic
about the future,
[282]
that can drive up stock prices
[284]
and that can help the economy.
[286]
- [Narrator] But changing
investor sentiment
[287]
can take a long time,
[288]
and the recovery can be
a difficult waiting game.
[291]
- For many individual investors,
[292]
holding tight is often
the best path forward.
[295]
Historically selling
stocks during bear markets
[297]
has been a terrible idea.
[300]
- [Narrator] Which is to say in the past,
[301]
bear markets have always turned around
[303]
and have sometimes
resulted in high returns
[306]
for patient investors.
[307]
But bears are unpredictable.
(bear growls)
[310]
And the next time stocks take a steep dip,
[312]
it could be years before
investments pay off.
Most Recent Videos:
You can go back to the homepage right here: Homepage