What's the definition of a pullback, bear Market, and a recession? Find out in this week's Arista Advice and how these terms are effecting the current market conditions.
Hope you're well and having a great week in light of the COVID-19 wherever you're quarantined or shelter-in-place, hope you're doing well, and you're safe and you're healthy.
Question of the week is Paul, what is a correction? What's a bull market? What's a bear market? And what's this recession that people are talking about? Let me give you some insight.
First definition: What is a pullback? A pullback represents a mild selloff in the market that refers to a dip of 5 or 10%.
Second question is what's a correction? A correction is a degree in severity that there is a decline of either 10 to 20% from a peak.
Third definition: What's a bear market? A bear market indicates a broad market decline of 20% or more from the peak of that calendar year.
Fourth question: What's a recession? My dear friends, a recession is when we have a negative GDP of three quarters. Every quarter is three months. We do not yet know what the first quarter GDP is, but there's many that they're saying it will be a positive number. We are on track to potentially hit a 3% GDP until March 10th when COVID-19 really took to the headlines, but once we have three quarters of a negative GDP, we then are near and in many terms, academic terms, we are then in a recession.
Pullbacks, corrections, bear markets, recessions are all part of the investment cycle when stock prices are trending lower some investors try to second-guess. That's not prudent to anybody's financial health.
How's the bear market going to affect me this time? It's a great question. Nobody knows but we need to stay invested in the long game. Hope this is helpful. Give us a call. We're here to guide, lead you through this COVID-19 pandemic.