With the sudden and dramatic drop in the stock market, both in the United States and worldwide, you may have heard about bear markets and bull markets. Financial experts and others who follow the markets have stated that we are now entering into a bear market. However, you may be wondering, what is the definition of a bear market and a bull market, and where are we now?
A bull market is one where the stock markets and the economy are on the rise typically due to a strong economy and low unemployment. Investors are confident, more money is being invested in the stock market, and more private companies are choosing to become public by listing their companies on one of the stock exchanges. From 2009 until this point, the United States was widely considered to be in a bull market, and it is easy to see why. In the February 2009 timeframe, the Dow Jones Industrial Average (DJIA) – one of the largest markets in the United States and followed by millions around the world – had a value around 8,609.71. Over the following decade, it continued to rise to a historical high around 28,738.21 in December 2019. In the year 2019 alone, the markets provided their best returns in years, with the DJIA gaining 22.3%.
On the other hand, according to NPR, a bear market is a period of time where major stock indexes drop by twenty percent or more from a recent high, and remain at the lower value for at least a few months. After the big increase in stock prices from 2009 through 2019, the markets still appeared to be fairly stable through January and part of February. However, around the second week of February, we began to see the markets slowly declining, followed by a large drop in the third week of February and continual decline since then. As of right now, March 14, 2020, the market is near its 52 week low, and so far year-to-date, the DJIA is down 18.76%.
Therefore, since the significant drop in stock values worldwide only occurred within the past month, it is far too soon to declare us in a bear market. It is certainly possible that the markets could increase yet again and leave us in a volatile state where, rather than incrementally rising or falling, the markets are in constant flux, jumping and falling every day. Or, it is quite possible that the markets will continue their decline, either gradually or with drastic daily drops. That is part of the uncertainty of the stock market, and the volatility that investors face when investing in stocks. Part of this will depend on the spread of COVID-19 as a factor in the global economy. While some countries, like China, appear to be isolating the current outbreak of the coronavirus, other countries, including the United States, will likely continue to see the number of cases grow for at least a few weeks. This spread will certainly affect the economy as citizens spend more time at home resting and protecting themselves from becoming sick, rather than going on vacations, eating out at restaurants, and otherwise spending money.
What does this mean for the everyday citizen, such as yourself? If you are at an age where you are beginning to plan out your retirement, or maybe you have already retired, this market volatility can be detrimental to your retirement plans. Leaving your money in the stock market, where it can quickly decrease in value, is likely not what you want to do. Instead of placing your bets on stocks and government bonds, you should consider whether including an annuity in your retirement portfolio is a better option. Fixed annuities, that provide a guaranteed interest rate instead of following the track of the stock market, are a good investment vehicle when you are approaching or already in retirement.
Interested in learning more about how a fixed annuity can improve your retirement plans? Contact us today for a free, no obligation review and discussion!