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November 18, 2008

Bear markets

We're hearing the term "bear market" applied to today's stock market. What are bear markets and how frequent are they?

Dr. Mike Walden, North Carolina Cooperative Extension economist in the College of Agriculture and Life Sciences at N.C. State University, responds:

"There are two categories of trends, if you will, in the stock market. One is the bull market, and that means stocks are moving consistently higher. The other is the bear market, which is the opposite, where stocks are moving lower. In the last 100 years, there have been three major bear markets: 1906 to 1921, 1929 to 1942, and 1966 to 1982 over all these years. In each of those categories, the stock market did decline. Now, some people - importantly - are saying that we may be in the middle right now of another bear market. Indeed, if you go back to 2000, the stock market has dropped an average of almost 4 percent each year, so pessimists about the stock market are saying, 'Yes, that's indicative of the fact that we're probably in for another several years of the stock market being very wobbly.' That would constitute the fourth major bear market of the last 100 plus years. Others are optimists and say, 'No, that we'll come out of this, the stock market will come out stronger.' So you get the classic conflict between the bears and the bulls."

Posted by Dave at November 18, 2008 08:30 AM