What Is a Downswing?

A downswing is a downward turn in the level of economic or business activity, often caused by fluctuations in the business cycle or ꦑother macroeconomic events. When used in the context of securities, a downswing refers to a downward turn in the value of a security after a period of stable or rising prices.

Understanding a Downswing

A downswing is a buzzword that i💝nvestors use to describe poor market performance, indicating a downward turn in an economic cycle. A nꦑatural part of the business cycle, a downswing can be caused by several factors.

For instance, a downswing typically occurs when interest rates rise because the higher rates make it more difficult for businesses to acquire financing, which results in less expansion and fewer new companies launching. A downswing will also usually occur af📖ter a market has peaked as the prices of securities begin to decline.

While a downswing provides an attract🐲ive opportunity for investors to enter a market, it also carries some risk. Investors with decreased confidence in the performance of the market will be tempted to sell to prevent continued losses, and those looking to buy will speculate on the best price before the💝 security or the market begins an upswing again.

Under most circumstances, a downswing in a market is an indicator of a market 澳洲幸运5开奖号码历史查询:correction rather than something more substantial. But if the downswing gains momentum and the prices of securities continue to fall, it can be a signifier that a market is entering a 澳洲幸运5开奖号码历史查询:bear market.

Special Considerations

A market correction occurs when stock prices drop for a period of time after reaching a peak, usually indicating that prices rose higher than they sh🦋ould have. A stock price will drop to a level more representative of its actual value during a market correction.

Under typical circumstances, a market correction tends to last less than two months, and price drops are usually only 10%, depend꧒ing o𝓰n the stock.

A bear market, named after the downward motion a bear uses to attack prey, typically lasts much longer𝓡 than two months. Experts commonly define a bear market as when the price of a major i✅ndex such as the S&P 500 drops 20% or more.

In the last 92 years (1928 to 2020), there have been 50 bear markets, according to research done in 2020 by Yardeni Research. In most cases, the bear market coincided with the onset of an economic recession.