What is the Difference Between a “Correction” and a “Bear Market”?
A “correction” is when the major stock market indices like the S&P 500 goes down -10% to -20% across months – usually 6 to 9. The higher volatility indices like the NASDAQ and Russell 2000 usually are down 1.5x to 2x that amount.
At that point, the market typically finds a bottom – although often violently – and then becomes to stabilize and eventually recover. Usually, it returns to previous highs within 6 to 12 months.
A “BEAR market” is when these indices go down -30% to -50% for the S&P 500 and even more for the higher volatility indices. These last YEARS – usually 18 to 24 months.
They also bottom violently but typically don’t recover for another 2 to 5 years.
Note that the bottom of a “correction” always feels like a new “BEAR market” but it isn’t.
Which one are we in right now? My bet is still a “correction” but stay tuned for next week and will tell you why…
Stay safe out there!
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Hint: Originally started as a bathing beach resort in the 1870s this amusement park company owns one of the oldest operating amusement parks in the U.S. They also own another 20 amusement/water parks across the country.
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