Let’s talk about the bear in the room
Share markets have been feeling especially grizzly recently. In fact, the S&P 500 Vanguard ETF (VOO) has now fallen into what’s known as a ‘bear market’, dropping 20% from its recent peak and wiping out all of the gains made during 2021. Grrrrr. 🐻 Although 20% is a completely arbitrary number, calling it a bear market just sounds way cooler, and is a quick way to express that investing is no marmalade sandwich teddy bear’s picnic right now. 🧸 It’s not just called that in the US. The New Zealand NZX50 index has been in a bear market too, and we Kiwis craft beers, not bears!
So why’s the ‘bear market’ suddenly talk of the town? Share markets have been mauled as central banks, like the US Federal Reserve, push up interest rates to try slow charging inflation. It’s like Christopher Robin taking the honey pot away from Winnie the Pooh in the middle of his lunch. Oh bother. 🍯
There are all sorts of theories on where the name ‘bear market’ comes from. And lovable Pooh isn’t one of them. One theory is that the name bear market comes from the idea of bears retreating into hibernation to slumber through the winter chill. Crypto currencies have their own version, the dreaded ‘crypto winter’. 🥶 A bull market, on the other hand, is a market that rises because bulls charge forwards. Another theory is it’s named because bears attack down with their claws, while bulls attack by lifting with their horns and throwing up into the air.
An alternative way to think about a bear market could be thinking of it like a Briscoes sale, or a ‘buyers’ market’. Some share prices are lower in a bear market than in a bull market, so may present investing opportunities for investors who are sticking with their long-term investing plan. See? Smarter than the average bear. 🌲
We’re not financial advisors and Hatch news is for your information only. However dazzling our writing, none of it is a recommendation to invest in any of the companies or funds mentioned. If you want support before making any investment decisions, consider seeking financial advice from a licensed provider. We’ve done our best to ensure all information is current when we pushed ‘publish’ on this article. And of course, with investing, your money isn’t guaranteed to grow and there’s always a risk you might lose money.