In a two-part series, Nick Dewhirst explores market categorisation and by using four examples of Wall Street crashes tries to determine the nature of the current downturn. This week, the falls of 1980 and 1987 are examined
According to the strategists, a blip is less than -10%, a correction is between -10% and -20% and a bear market is more than -20%. So, does this mean the 7% decline on Wall Street is a blip, the 12% fall in Asia ex Japan is a correction and the 25% drop among emerging markets is a bear market? However neat this categorisation, it is not very helpful because it only tells us what has already happened. Categorising something as a bear market suggests prices may have a lot longer and a lot further to fall. What if the decline is already largely complete? If so, it would be foolish to sell at ...
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