![]() Prospective investors should be aware that an investment in any private equity fund is speculative and involves a high degree of risk that is suitable only for those investors who have the financial sophistication and expertise to evaluate the merits and risks of such investment and for which the investment does not represent a complete investment program. But that pessimism creates excellent investment opportunities for long-term investors who continue to buy stocks on sale.RISK CONSIDERATIONS RELATING TO PRIVATE EQUITY FUNDS Bear markets eventually become excessively pessimistic. Just like bull markets eventually become overly optimistic. Stock market crashes aren’t as scary to deal with when you invest money you don’t need right away, have an emergency fund, and haven’t overextended your current lifestyle with debt. Unless you are a few years away from retirement: Any drop in the stock market should be seen as a gift. Final Thoughts: Stock Market Bear Markets Remember, stock market crashes are normal and expected. There is no reason not to expect the same to happen with this current bear market we are experiencing. And each one of those bear markets has eventually turned back to bull markets. ![]() There have been a total of 26 bear markets since 1929. When does a bear market turn into a bull market?Ī bear market turns into a bull market when stocks jump 20% higher from their previous low.įor example, if a stock index hits a low of $100 and then increases 20% over a few months to $120, the bear market would be considered over, and a bull market would be declared. GDP data is released every quarter (every three months). So if there are two consecutive quarters of negative GDP growth, that generally signals a recession. Here’s a quick chart showing GDP growth for the United States over the past 65 years: (Note: GDP is how the government calculates how much the economy has grown or shrunk in a given period). What is a recession?Ī recession is when business activity declines and the overall economy shrinks. They are a normal part of the overall economic cycle. A technical recession is generally declared after 2 negative quarters of GDP growth. GDP measures the total amount of goods and services sold throughout an economy. Since 1929, only 15 of the 26 bear markets occurred during an economic recession.įor that reason, let’s define the difference between a recession and a bear market. Although stock prices generally follow economic performance, the two are not always in sync. (Look back to all of the past recessions for reference). It might not feel like it at the time, but stock market crashes generally bring the best investment opportunities for long-term investors. The biggest mistake many people make during stock market crashes is selling all of their stocks because they think the stock market is ending. ![]() One thing to keep in mind is this: You haven't officially lost anything until you sell. How long that recovery takes depends on a few different factors… The stock market will eventually recover. Will the stock market recover? If history is any guide, yes. And our emotions often get swept up in the recurring ebb and flow of the stock market. Stock market crashes are normal and expected.Īlthough market crashes are normal, they aren't always easy to deal with emotionally. ![]()
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