Financial Market

How should you respond to a bear market?

What causes bear markets? Each one is different, but the current one is largely the result of several factors.

So far, 2022 has not been a good year for investors. In fact, we’re moving into bear market territory. What should you know about bear markets? And how should you respond?

To begin with, a bear market occurs when a stock market index, such as the S&P 500, falls at least 20% from its most recent high point. You might think this type of drop is rare, but that’s not actually the case. Historically, bear markets have occurred every few years and are a normal feature of the investment landscape. We experienced a bear market fairly recently, from mid-February 2020 through late March of that same year.

What causes bear markets? Each one is different, but the current one is largely the result of several factors, including high inflation, rising interest rates, the war in Ukraine and global supply chain problems.

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