New York (AP) — Wall Street may be facing another bear market. Recent tariffs imposed by the Trump administration are raising concerns that increased import taxes could hurt the global economy.
The last bear market hit in 2022, but this situation feels reminiscent of the sharp decline in 2020 when the S&P 500 plummeted 34% in just one month, marking the shortest bear market on record.
Here’s what you need to know about bear markets:
A bear market happens when stock indexes like the S&P 500 or the Dow Jones Industrial Average drop 20% or more from recent highs over a sustained timeframe. The term “bear” symbolizes a market that is retreating, similar to how bears hibernate. Conversely, a bullish market indicates rising conditions, like how bulls charge ahead.
Currently, the S&P 500 is 17.6% below its all-time high from February 19, closing down 0.2% recently. Meanwhile, the Dow dropped 0.9%, and the Nasdaq composite showed a slight recovery with a 0.1% increase.
Investors are especially anxious due to the ongoing trade war. The recent implementation of a 10% tax on imports from various countries, along with higher tariffs on nations running trade surpluses with the U.S., has raised alarms. Following these announcements, global markets reacted negatively, spurring further declines.
Tariffs often translate into higher consumer prices, adding to inflation pressures. They can provoke retaliation from trading partners, which could negatively impact economies worldwide. Furthermore, such taxes complicate business decisions on sourcing, factory locations, and pricing, leading to delays or cancellations in investments necessary for economic growth.
According to recent reports, the U.S. economy is already showing signs of slowdown. In fact, U.S. inflation recently ticked higher, further worrying analysts about the long-term consequences of these tariffs.
Historically, bear markets have lasted about 13 months on average and have seen drops of around 33%. Notably, the most significant decline happened during the 2007-2009 bear market, where stocks plummeted 57%.
Despite the fear surrounding bear markets, it’s essential for investors to remember that every previous bear market has eventually led to another all-time high. The S&P 500 has shown resilience, bouncing back from downturns, which indicates potential for future recovery.
Experts suggest that unless the funds are urgently needed, maintaining investments through volatility can be smart. Moreover, the best stock market days often occur during or shortly after a bear market. Therefore, selling now could cut potential gains.
In summary, while bear markets can be daunting, understanding their history and the market’s cyclical nature may encourage investors to remain steady amid uncertainty.
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Check out this related article: Trump Unveils Bold Plan: New 50% Tariffs on China Could Reshape Trade Relations
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