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Back to News & ViewsWhat investors need to know
The global stock markets can be highly volatile, with wide-ranging annual, quarterly, even daily swings. Although this volatility can present significant investment risk, when correctly harnessed, it can also generate solid returns for shrewd investors.
Market volatility
Both bull and bear markets have their advantages and disadvantages, but ultimately it is up to the individual investor to decide which one is right for them. In a bull market, investors will typically buy stocks that they believe will increase in value over time. They may also buy stocks that pay dividends, which can provide a steady stream of income even during periods of market volatility.
Bear markets are defined as a period of time when stock prices fall and investor sentiment is negative. Bull markets, on the other hand, are defined as a period of time when stock prices rise and investor sentiment is positive.
Investment market
There are a number of factors that can contribute to a bear market as we’ve seen recently, including high interest rates, inflation, political unrest and fears of an economic recession. In contrast, bull markets are typically associated with periods of economic growth, low interest rates, and stability.
In stock market parlance, a bear market means stocks are down 20% or more while a bull signals the market is up significantly. In order to properly assess whether an investment market is in a bearish state, it is important to consider both current conditions and future prospects.
Diversified portfolio
Some key indicators that may signal a bear market include a decrease in stock prices across the board, an increase in volatility, a rise in put options (options that allow the holder to sell a security at a set price) relative to call options (options that allow the holder to buy a security at a set price) and a flight to safer investments, such as bonds or gold
If you are considering investing in a bear market, it is important to keep in mind that these conditions can last for an extended period of time and that there is no guaranteed way to predict when or if the market will turn around. As such, any investment made during a bear market should be done so with a long-term time horizon in mind. Additionally, it is important to have a well-diversified portfolio to help mitigate some of the risks associated with bear markets.
Investor sentiment
The opposite of a bear market, in a bull market, investor sentiment is optimistic and confidence is high. Prices may rise due to strong economic fundamentals or simply due to investors' willingness to pay more for assets than they are currently worth.
A bull market can last for months or even years, but eventually, the price increase will end and a bear market will follow. While there is no guaranteed way to predict when a bull market will start or end, there are certain indicators that can give investors an idea of whether the market is about to turn.
Economic indicators
For example, if prices have been rising for an extended period of time and valuations are getting stretched, it could be a sign that a correction is due. Similarly, if economic indicators such as employment and inflation are starting to deteriorate, it could be a sign that the market is about to turn. While there is no sure way to predict when a bull market will start or end, understanding the signs can help investors make more informed decisions about when to buy or sell.
While bear and bull markets can have a significant impact on the global stock markets and the global economy as a whole, it’s important to remember that they are part of the natural ebb and flow of the market cycles. As such, investors shouldn’t panic during a bear market, nor should they become complacent during a bull market. Instead, they should maintain a long-term perspective and focus on creating a well-diversified portfolio that can weather any market conditions.
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THE VALUE OF INVESTMENTS AND INCOME FROM THEM MAY GO DOWN. YOU MAY NOT GET BACK THE ORIGINAL AMOUNT INVESTED. PAST PERFORMANCE IS NOT A RELIABLE INDICATOR OF FUTURE PERFORMANCE.