Pullback, Correction or Bear Market?

People like using labels to describe stock market volatility. Generally speaking, most pundits describe a decline of less than 10% as a pullback, a decline of 10% to 20% as a correction and any decline greater than 20% as a bear market. If any of these events happen quickly they are usually referred to as a ‘crash’ or a ‘waterfall decline’. Since the mid 1960’s, most bear markets have been caused by or accompanied by recessions. In the chart below, one can see that the dips in US equities greater than 20% were generally associated with recessions. The two notable exceptions are the Crash of ’66 and the Crash of ’87. Therefore, if you don’t think the economy is headed for a recession then


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