Kavan Choksi: An Overview of an Economic Recession

Kavan Choksi Talks About Bear Markets and Recessions

With his expertise in economics and finance, Kavan Choksi has provided thoughtful commentary to world-famous publications such as Authority Magazine, Business Insider, CEOWORLD Magazine, International Business Times, The Epoch Times, Forbes, Fox Business, Financial Express, and Money Magazine.

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Today, Kavan Choksi shares what he knows about bear markets and economic recessions with readers everywhere.

The fact of the matter is that many investors fear a bear market. When any broad equity index (Dow Jones Industrial Average or Nasdaq) experiences a 20% (or more) drop for two months (or more), that's the bear tearing down everything in its path. Usually, people see it as a decline in the graphs of stock markets and FOREX charts.

However, if the drop in stock prices lasts less than 60 days, it's not considered a bear market. It's called a correction. A bear market happens when the demand for stocks goes down. Investors turn skeptical about the entire market. Economic recessions, high unemployment rates, and rising inflation often lead to bear markets.

The opposite of the bear market is called the bull market, explains Kavan Choksi. It's when prices of stocks rise, mimicking the motion of a bull goring upwards with its horns. A bear market is almost unpredictable, so it's always best to prepare. On average, bear markets happen once every 3.5 years, many resulting from economic recessions. The last one occurred in 2009. It means a bear market is overdue.

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Bear markets can be tough for investors to weather, and history suggests that these downturns tend to last around ten months on average. However, the last two bear markets were particularly harsh, lasting several years and cutting stock prices by more than 50%. The first of these, from 2000-2002, saw a 58% decline in the S&P 500, followed by the even more severe bear market of 2007-2009, which saw a 57% drop in the index. While market downturns are inevitable in investing, investors must stay informed and remember that these bear markets are temporary, even if the effects can be long-lasting.

Kavan Choksi is a business management consultant who shares his insights on business, finance, and economics on his blogs that can be accessed here.