![]() The declines have been spurred by an aggressive shift in policy by major central banks to fight inflation. The sharp fall in equity prices since January’s peak coincided with the worst first half performance of the S&P 500 index since 1970 and the fourth worst start to a calendar year on record.ĭeclining equity valuations have been a global phenomenon over 2022. Since then, the S&P 500 has partly recovered and is currently trading 10.7% below the all-time high level. The index hit the -20% threshold on 13 June and hit a maximum drawdown (to date) of -23.6% on 16 June. The S&P 500 reached an all-time high on 3 January this year before beginning its descent lower. By this definition, the US share market, as proxied by the widely-watched S&P 500 index, entered a bear market at the start of June. Conversely, a bull market is commonly defined as a 20% price rise from a recent trough. Furthermore, asset markets typically lead the economic cycle as investors price in the outlook for growth and inflation.Ī bear market is typically characterised as a price fall of 20% or more from a recent peak. Unsurprisingly, bull and bear markets tend to mirror fluctuations in the business cycle. In contrast a ‘bull market’ describes a period of strong price growth associated with a rise in investor sentiment. ![]() Such periods result in changes to investor expectations around expected returns and risk, and subsequently, asset prices. Bear markets typically coincide with periods of economic recessions, tight monetary conditions or negative economic shocks. The term ‘bear market’ is commonly used within financial markets to describe large price declines characterised by weak investor sentiment. However, we could not rule out a domestic bear market should global and domestic economic conditions deteriorate considerably.
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