Just because someone invests does not mean they understand markets or economics, truthfully many of these investors have never been through an actual bear market. Bear markets do tend to be painful of on the wrong side of the trade but they’re necessary to reset the stage for new future market returns. Without this event it’s likely the next decade foil much of the financial plans. Many argue that the correlation that happened in equities in the month of March was a “bear market,†that event was no more than a standard correction within a up trend. For those who may not know trends work in 2 different ways, we have up (Bullish) trends and down (bearish) trends. Both of these trends do the same thing just in the opposite direction of one another. All trends are made up of impulsive moves followed by a correction. Let’s use an up trend as the example; an impulsive move on an uptrend would be a push to the upside while the correction would be a push to the down side. In order for a up trend to form each impulsive move needs to create a higher high and each correction needs to create a higher low.
So, what we happened to see in March of 2020 was a correction…”Corrections” generally occur over short period, and don’t break the prevailing trend in prices, and are quickly resolved by markets reversing to new highs, which had everyone screaming a “V shape recovery.â€
“Bear Markets” tend to be a long-term affair where prices grinds sideways or lower over several months as asset valuations are reverted. What we had experienced was nothing more then a deep correction which had a market shock. The bear market that many have been predicting has yet to come, but all the signs show it is coming. This bear market will be one of the deepest longest bear market I believe we may ever see. As an investors it’s very important that we understand how trends move and how they work, so we can identify when we are in a bear market or in a Bull market instead of just taking someone else’s word for it. All trends follow the same exact formula; impulse followed by correction impulse followed by correction and so forth.