Wall Street has started the week with sharp losses, plunging the benchmark S&P 500 index into bear market territory.
The S&P 500—an index of 500 of the top publicly traded companies in the U.S.— fell 3.9 percent on Monday, bringing its losses to 22 percent since its January high.
These losses have occurred due to a multitude of reasons, including the war in Ukraine, rising interest rates, a slowdown in China's economy, high inflation and recession fears.
All these factors combined have led investors to rethink where and how they should invest their money.
The tech-heavy Nasdaq has fallen even farther and is down by a third since last November.
Many assets have been hit in the significant slump on Wall Street, including cryptocurrencies, which have seen $2 trillion wiped off their value since the peak in November 2021. Bitcoin—the largest cryptocurrency—fell below $23,000 on Monday after trading as high as $67,000 in November.
What Is a Bear Market?
A "bear market" is a Wall Street term used when an individual stock, or an index like the S&P 500 or the Dow Jones Industrial Average, falls by 20 percent or more for a long period. Investopedia explains this below:
"A bear market is when a market experiences prolonged price declines. It typically describes a condition in which securities prices fall 20% or more from recent highs amid widespread pessimism and negative investor sentiment.
Bear markets are often associated with declines in an overall market or index like the S&P 500, but individual securities or commodities can also be considered to be in a bear market if they experience a decline of 20% or more over a sustained period of time—typically two months or more."
How Long Does a Bear Market last?
Since World War II, bear markets have taken around 13 months to go from their highest point to their lowest, and 27 months to get back to break even, according to the Associated Press.
Sam Stovall, chief investment strategist at CFRA, told the AP that bear markets gained their name because bears hibernate, so bears represent a market in retreat, and that when the stock market is surging, it's called a bull market, because bulls charge.
When Was the Last Bear Market?
The last bear market happened in 2020, at the start of the COVID-19 pandemic, so just over two years ago. But after slumping at the outbreak of the pandemic, stocks rocketed back for much of 2020 and 2021.
With the latest slump, investors may be wondering whether it's time to sell. That depends on your personal circumstances, of course, but investment advisers often recommend that long-term investors look to ride out short-term rises and falls in the stock market.
And bear in mind that some of the most successful days for Wall Street have been during or right after a bear market. For instance, during the bear market of 2007-2009, there were two days when the S&P 500 rose by 11 percent.
Uncommon Knowledge
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