By Aimee Picchi
/ MoneyWatch
Economists reverse course on recession fears
Americans' investments are out of the grip of one of the longest bear markets in recent history.
The S&P 500 gained 0.6% on Thursday, pushing the market 20% higher than the trough stocks hit in October, closing at 4,294. That means Wall Street was finally released from the claws of a bear market — when stocks falls 20% or more from a recent high for a sustained period of time — that began in June 2022.
While bear markets are common, the most recent slump marked one of the first major downturns for younger investors, as well as proving especially painful for older workers who saw their retirement investments slide. Last year, Wall Street soured on stocks as the Federal Reserve began a regime of interest rate hikes to battle record-high inflation.
But the S&P 500 has bucked the bear market by gaining more than 12% this year, as what once seemed like a certain recession never materialized and the job market remained strong. The gains have helped buoy the investment holdings of millions of Americans, who suffered a$3 trillion hitto their retirement accounts last year.
Better days ahead?
"Bottom line, the economy has been very resilient," said Anthony Saglimbene, chief markets strategist at Ameriprise Financial.
"So much negativity was built into the market," he said. "While it's too early to know this for sure, stocks look like they're doing what they normally do when all the negativity has been discounted into the stock market: They start moving higher in anticipation of better days ahead."
The most recent bear market lasted 248 trading days, according to the Wall Street Journal, citing Dow Jones Market Data. By comparison, the average bear market has lasted 142 trading days.
Prior to the most recent downturn, investors suffered a short-lived bear market at the start of the pandemic, when stocks plunged more than 20% from February 19, 2020, through March 23, 2020, then regained their footing and hit new highs.
With reporting by the Associated Press.
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Certainly! The article you provided delves into significant economic concepts and market movements. Let's break down the key terms and concepts mentioned:
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Bear Market: A bear market refers to a period of sustained decline in the stock market, where prices fall by 20% or more from recent highs. It's often associated with pessimism, economic downturns, and investor uncertainty.
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S&P 500: This is an index that measures the stock performance of 500 large companies listed on stock exchanges in the United States. It's a widely followed indicator of the stock market's health and direction.
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Wall Street: Refers to the financial district in New York City and is often used as a metonym for the U.S. financial markets and the financial industry as a whole.
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Federal Reserve and Interest Rate Hikes: The Federal Reserve (the Fed) is the central bank of the United States. Interest rate hikes are actions taken by the Fed to increase borrowing costs, aiming to control inflation by making borrowing more expensive.
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Inflation: The persistent rise in prices of goods and services in an economy over a period of time, eroding purchasing power.
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Market Resilience: This indicates the ability of the economy or market to recover quickly from adverse events or shocks.
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Job Market Strength: Refers to the health and stability of employment opportunities within an economy, often measured by metrics like unemployment rates, job creation, and labor force participation.
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Retirement Accounts: Financial accounts where individuals save and invest for their retirement, such as 401(k)s or IRAs.
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Market Negativity and Anticipation: The article highlights how market sentiment, which can be influenced by factors like economic data, news, and forecasts, impacts stock prices. Negativity being discounted implies that pessimistic views are already factored into stock prices, and the market may anticipate future positive developments.
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Bear Market Duration: The duration of a bear market, in this case, lasted 248 trading days, longer than the average bear market duration of 142 trading days.
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Pandemic Bear Market: Refers to the rapid decline in stock prices during the onset of the COVID-19 pandemic, followed by a swift recovery.
The article provides insights into how economic factors like inflation, interest rates, job market performance, and investor sentiment impact the stock market's movements, affecting the financial well-being of individuals, especially concerning their retirement savings.
