Wall Street Enters a Bear Market. Should I Buy or Sell Stocks?

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Wall Street is back in the claws of a bear market as worries about inflation and higher interest rates overwhelm investors.

A bear market is a term used by Wall Street when an index like the S&P 500, the Dow Jones Industrial Average, or even an individual stock, has fallen 20% or more from a recent high for a sustained period of time.

The Dow industrials sank 2.8% and the tech-heavy Nasdaq composite, which already was in a bear market, tumbled 4.7%. Last month, the Fed signaled additional rate increases of double the usual amount are likely in upcoming months. Consumer prices are at the highest level in four decades, and rose 8.6% in May compared with a year ago.

Gas prices, groceries, even airline tickets — it seems like it's all going up lately. It feels like the recently raised interest rate is intended to start slowing the economy. So we talked to John Leer, chief economist at Morning Consult, to help us understand why inflation is happening and how it will affect us.Even if the Fed can pull off the delicate task of tamping down inflation without triggering a downturn, higher interest rates still put downward pressure on stocks.

Stocks have declined almost 35% on average when a bear market coincides with a recession, compared with a nearly 24% drop when the economy avoids a recession, according to Ryan Detrick, chief market strategist at LPL Financial.If you need the money now or want to lock in the losses, yes. Otherwise, many advisers suggest riding through the ups and downs while remembering the swings are the price of admission for the stronger returns that stocks have provided over the long term.

 

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