Bulls, bears and dead cats are lurking in the background of President Donald Trump’s trade war. As the effects of the administration’s latest tariffs unfold, news consumers may confront unfamiliar terms related to investments or financial markets. Here is a guide to some of the most common words.
A bear market is a term used by Wall Street when an index such as the S&P 500 or the Dow Jones Industrial Average has fallen 20% or more from a recent high for a sustained period of time.
Why use a bear to refer to a market slump? Bears hibernate, so they represent a stock market in retreat. In contrast, Wall Street’s nickname for a surging market is a bull market, because bulls charge.
When stocks rebound briefly in a moment of free fall or uncertainty, it’s known as a “dead cat bounce”. That’s linked to the idea that even a dead cat will bounce when it falls from a great enough height. The market recovery tends to be temporary and brief, and the downturn tends to resume.
Capitulation refers to the point when investors give up on the idea of recouping their losses and sell, often out of fear and intolerance of falling prices. This tends to happen during times of low confidence, high uncertainty and volatility.
Capitulation can sometimes indicate the bottom of a market, but it’s easier to identify in retrospect.
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A recession is a time when the economy shrinks and unemployment rises.
Recessions are officially declared by the National Bureau of Economic Research, a group of economists who consider factors such as hiring trends, income levels, spending, retail sales and factory output. The bureau’s Business Cycle Dating Committee defines a recession as “a significant decline in economic activity that is spread across the economy and lasts more than a few months”.
The organisation typically does not declare a recession until well after one has begun, sometimes as long as a year later.
In the days before Trump’s most recent tariffs took effect, economists at Goldman Sachs raised their assessment of the odds the US will experience a recession from 35% to as high as 65%. Analysts rescinded that forecast on Wednesday after his administration announced a 90-day pause on most of the levies.
“Buying the dip” refers to purchasing a stock or buying into the market right after it has lost value, at a discount. The phrase is commonly used by retail investors. Unfortunately, it’s all but impossible to time the market, to know where the bottom will be, or how long a recovery will take.
