3 Bear Markets Since 2009

3 Bear Markets - An Explosion

Bears love to mention how the economy is due for a recession and the stock market is due for a collapse. 

That’s a mistake because there have been a few slowdowns and technical bear markets this cycle. Technically, there is no numerical definition of what makes a recession. 

Some people claim a recession is 2 quarters of negative GDP growth, but that’s wrong. If growth needed to be negative for there to be a recession, there would almost never be global recessions. Growth simply needs to be below its potential. Slowdowns are also when growth is below where it could be. 

The differentiation is recessions are more broad-based, meaning they affect the whole economy.

Looking for another 2008 financial crisis just because there hasn’t been a recession for about 10 years is a big mistake. The economy is probably in its 3rd slowdown of this expansion. It hasn’t been as smooth sailing as the bears portray. 

The consumer isn’t leveraged enough to catalyze a full-blown recession. A global financial crisis like the one in 2008 won’t happen anytime soon. That was like a 1 in 100-year event.

3 Bear Markets - The stock market isn’t due for a bear market because it just had one. 

Stocks don’t always fall 50% during bear markets. Corrections of that size are very rare. 

As you can see from the chart below, there have been 3 small bear markets since the financial crisis. This chart uses intraday highs and intraday lows. S&P 500 fell over 20% in 2011 and 2018. Dow never fell 20%. Nasdaq also fell over 20% in 2011 and 2018. Russell 2000 fell over 25% in 2011, 2015-2016, and 2018. This shows the issues surrounding the definition of a bear market.

The recession definition is vague, and the bear market definition is specific. Both show how the economy and stock market haven’t been on a perfect run in the past 10 years. The stock market certainly has done well in 2019. However, it’s in need of 5% decline, not a 50% one.     

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