Bear Market:
The S&P 500 briefly entered bear market territory, dropping over 20% due to escalating US tariffs under President Trump. This is the first such decline since 2022, triggering global recession fears and investor panic.
- A bear market refers to a situation where a stock index declines by 20% or more from its recent peak, indicating investor pessimism and negative economic outlook.
- Causes of a Bear Market:
- Weak Macroeconomic Indicators: Declining GDP growth, rising unemployment, and reduced industrial output.
- Investor Sentiment Collapse: Fear-driven sell-offs due to uncertainty or panic.
- Policy Shocks and Geopolitics: Sudden tariffs, wars, or oil crises disrupting investor confidence.
- Overvaluation of Stocks: Market corrections after an unsustainable bull run.
- Key Characteristics of Bear Market:
- Sharp price decline: More than 20% from peak levels.
- Widespread investor panic: Risk aversion dominates.
- Low investor confidence: Reduced demand for equities.
- Higher bond demand: Shift toward safe assets.
