As the risks to global stock markets increase, from soaring inflation and tightening central bank policies to the economic consequences of the Russian invasion of Ukraine, the list of stock indices that have entered the bear market is expanding.
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According to the agency Bloomberg The stock sell-off this year has erased almost $ 12 trillion from the global stock value – as measured by the MSCI All-Country World Index.
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Bear market
Bear market is a term used for a significant drop in stock market prices. The bear market can usually be described as a situation where the price losses of the index from the last maximum exceed 20 percent. At this stage, price losses are rather considered as corrections.
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The bear market phenomenon is probably named after the way a bear attacks its prey – it flips its paws down. Therefore, markets with declining stock prices are called bear markets.
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The last major indicator to enter the bear market was the Nasdaq 100 technology index on Monday. more of recent highs.
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The Prague Stock Exchange is also experiencing a decline this year. Its PX index has fallen by as much as 17 percent since February, which does not meet the definition of a bear market, but there is not much missing. The Prague index has already managed to erase part of this year’s losses, but it has been losing about eight percent since the beginning of the year, according to the Prague Stock Exchange.
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The European Indices Euro Stoxx 50 and DAX are among the main indices that have been among the bear markets this year, but have since partially recovered from their losses. However, other indices, such as the MSCI Emerging Markets index, are losing ground.
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The Chinese CSI 300 index continues to sell significantly due to risks such as persistent regulatory pressures, new coronavirus lockdowns and concerns about sanctions due to China’s relationship with Russia.
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Other monitored indices include the Japanese Nikkei, which is on the verge of entering the bear market. The MSCI World Index fell 13 percent from recent highs. This index has hit the bear market a total of five times in the last 20 years, with the slump during the global financial crisis in 2008 being by far the largest.
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On the other hand, new market orders have turned some previously underperforming indices – such as the British FTSE 100 and the Spanish IBEX – into a relative winner.
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In terms of sectors, the only group that has made profits this year is energy. This was mainly due to rising oil prices, while all other sub-units of the S&P 500 index are declining, as shown in the chart below.
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Investors hold cash
As the list of bear markets grows, investors are looking for new safe havens, both in asset classes and regionally between states.
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A March survey of Bank of America fund managers showed that the cash allocation among clients rose to its highest level since April 2020, while equity exposure fell to its lowest level in almost two years.
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Most investors in the same survey now expect global equities to fall into a bear market this year as the growth outlook falls to its lowest level since the 2008 financial crisis.
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The Berkshire Hathaway company of the famous American investor Warren Buffett also currently holds a large amount of cash. At least according to an annual letter to shareholders, in which it informs its investors about the financial situation in the company and reflects on the decisions it has made over the years.
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This year’s report, released earlier this month, reported that Buffett was holding $ 144 billion in cash and waiting for suitable business opportunities.
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