How Close Are We To A Bear Market, And Can It Be Avoided?

With the Dow Jones Industrial Average now frequently dipping into correction territory, the minds of many traders and investors are turning to the question of how long before this bull run — the longest in Dow history post-World War II — becomes a full-on bear market.

How You’ll Know We’re In A Bear Market

While a 10-percent decline from all-time highs in a major stock index is a correction, a 20-percent drop constitutes a bear market.

The Dow Jones and S&P 500 each made all-time highs earlier this year of 26,616.71 and 2,872.87, respectively. In the absence of new all-time highs, stock fans on bear watch should be waiting for the 21,293.37 level in the Dow and 2,298.30 in the S&P.

Are We On A Bearish Path?

The return of market volatility, fears of a trade war and the recent underperformance of some of the major indices’ largest components have been a drag on stocks overall. Friday’s jobs report failed to settle markets, as payrolls missed estimates and unemployment ticked up slightly in March, interrupting the market’s rally from lows seen early in the week.

How Might We Rebound?

Before you abandon the markets for cryptocurrencies and rare coins, there’s plenty of reason to hope the bull market could have a charge or two left this spring.

The market is still attractive, with a strong earnings season likely ahead, Morgan Stanley analyst Michael Wilson said in a recent research note.

“We view earnings growth as the single most important factor for equities and think that continued momentum should help move the market higher,” Wilson said. 

Other permabulls will bank on the support of seasonality. After all, since 1950, April’s 1.34-percent average return is only eclipsed by the Santa Clause rally of November (1.39 percent) and December (1.53 percent), according to moneychimp.com.

The Dow Jones was down 1.54 percent to 24,127 at the time of publication Friday afternoon. 

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