What’s
the difference? What do these terms mean for you?
Provided by Taylor McClish
The COVID-19 outbreak has put tremendous pressure on stock prices,
prompting some investors to blindly and indiscriminately sell positions at a
time when the entire market is trending lower. Worried investors believe
"this time it's different." When the market drops, some investors
lose perspective that downtrends – and uptrends – are part of the investing
cycle. When stock prices break lower, it's a good time to review common terms
that are used to describe the market's downward momentum.1,2
Pullbacks. A pullback represents the mildest form of a selloff in the
markets. You might hear an investor or trader refer to a dip of 5% to 10% after
a peak as a “pullback.”1
Corrections. The next degree in severity is a “correction.” If a market or
markets retreats 10% to 20% after a peak, you’re in correction territory. At
this point, you’re likely on guard for the next tier.1
Bear Market. In a bear market, the decline is 20% or more since the last peak.1
All this is normal. Pullbacks, corrections, and bear markets are a part of the
investing cycle. When stock prices are trending lower, some investors can
second-guess their risk tolerance. But periods of market volatility can be the
worst time to consider portfolio decisions.
Pullbacks and corrections are relatively common and represent
something that any investor may see in their financial life, from time to time
– often, several times over the course of a decade. Bear markets are much
rarer. What we are experiencing now represents the start of the ninth bear
market since 1926. This bear market follows the longest bull market on record.1
How is this bear market going to affect me? That’s a good question, but it’s something that you won’t
fully understand in the here and now. The average bear market lasts 146 days
for the Standard & Poor’s 500.2
A retirement strategy, formed with the help of a trusted financial
professional, has market volatility factored in. As you continue your
relationship with that professional, they will also be at your side to make any
adjustments as needed and help you make any necessary decisions along the way.
Their goal is to help you pursue your goals.
Taylor McClish may be reached at (503) 239-3060 or Taylor.McClish@cunamutual.com
This material was prepared by MarketingPro, Inc., and does not
necessarily represent the views of the presenting party, nor their affiliates. This
information has been derived from sources believed to be accurate. Please note
- investing involves risk, and past performance is no guarantee of future
results. The publisher is not engaged in rendering legal, accounting or other
professional services. If assistance is needed, the reader is advised to engage
the services of a competent professional. This information should not be
construed as investment, tax or legal advice and may not be relied on for the
purpose of avoiding any Federal tax penalty. This is neither a solicitation nor
recommendation to purchase or sell any investment or insurance product or
service, and should not be relied upon as such. All indices are unmanaged and
are not illustrative of any particular investment.
Securities sold, advisory services offered through CUNA Brokerage Services, Inc. (CBSI), member FINRA/SIPC, a registered broker/dealer and investment advisor. CBSI is under contract with the financial institution to make securities available to members. Not NCUA/NCUSIF/FDIC insured, May Lose Value, No Financial Institution Guarantee. Not a deposit of any financial institution. CUNA Brokerage Services, Inc., is a registered broker/dealer in all fifty states of the United States of America.
Citations.
1 - kiplinger.com/slideshow/investing/T018-S001-25-dividend-stocks-analysts-love-the-most-2019/index.html
[3/10/2020]
2 - marketwatch.com/story/the-dow-just-tumbled-into-a-bear-market-ending-the-longest-bull-market-run-in-historyheres-how-those-downturns-last-on-average-2020-03-11
[3/14/2020]