It has been a rollercoaster of a ride for the stock market in recent weeks. After an incredible bull run that saw many indices reach historic highs, it looks like the bear market may be returning in full force. While some have speculated that this is just a technical correction and that the bull will eventually return, others have argued that this is the beginning of a prolonged bear market. The debate between these two camps has become heated and it remains to be seen which one will ultimately be proven right.
It is not hard to see why some would argue that this is just a technical correction. After months of being in a sustained bull market, it only makes sense that there would be a period of consolidation where stock prices could readjust. For the past several months, market sentiment had hit an optimistic extreme and a pullback was likely inevitable. Such technical corrections, while concerning, are a necessary part of any market cycle and usually do not have a major impact on long term trends.
On the other hand, some analysts remain unconvinced and have argued that the current situation could be the beginning of a prolonged bear market. While it is true that bull markets can last for extended periods of time, recent events have certainly increased the risk of such an occurrence. The US job market is still weak and there are lingering economic fears, such as trade tensions with China and rising interest rates. In addition, the Federal Reserve has recently put in place policies that could make it harder for corporations to use debt in order to finance their operations. If these and other issues are unable to be resolved in the near future, it could lead to a prolonged market downturn.
It is impossible to say with certainty whether this is just a technical correction or the start of a bear market. What is certain, however, is that investors should remain cautious and vigilant in the coming weeks and months. Staying informed about the current economic and political situation and diversifying one’s portfolio is always wise. If the current situation does turn out to be only a temporary bump on the road to further gains, then investors could potentially look back on this period with a sigh of relief. But if the bear market does return, then investors should be prepared to make necessary adjustments in order to protect their investments.
