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Two types of market downturns: big bears and baby bears* Thumbnail

Two types of market downturns: big bears and baby bears*

The Secrets of the Whales documentary series chronicles how different various whale species can be. Some whales are big, others small; some are vicious, others are not. The dwarf sperm whale is the smallest whale in the world and is smaller than most dolphins. On the other end of the spectrum, the blue whale is the largest whale and one of the largest animals to have ever lived on Earth (the average length of a blue whale is between 70 and 90 feet, which is the equivalent to the length of two school buses.) Killer whales have teeth, which helps them eat fish, seals, and other marine life, whereas blue whales have large sheets of baleen in their mouths, which act as a strainer for consuming small shrimp-like crustaceans.

Like whales, not all bear markets are the same. A bear market is defined as a decline of 20% or more from the most recent peak. As of the time of writing, we’re in a bear market in many equity markets around the world. In the U.S., there’ve been 15 bear markets for the S&P 500 Index since the 1950s. For our discussion purposes, we’ve included drawdowns of 19% or more as bear markets and have classified them into two buckets: big bears and baby bears. The baby bears mean a bear market outside of a recession, while a big bear is a bear market that occurs in a recessionary environment.


A rise in interest rates typically causes bond prices to fall. The longer the average maturity of the bonds held by a fund, the more sensitive a fund is likely to be to interest-rate changes. The yield earned by a fund will vary with changes in interest rates.

Currency risk is the risk that fluctuations in exchange rates may adversely affect the value of a fund’s investments.

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