First, let’s define our terms: a “Bear Market” is defined as a market that declines more than 20% from a previous high.
Don’t feel too bad for Japanese investors this year however. The Nikkei 225 Index rose over 50% from the beginning of the year to the peak on May 22. But the dramatic reversal caught some investors off-guard. From the Wall Street Journal:
“All of a sudden, ka-boom, markets have deflated heavily,” said Matthew Sherwood, head of investment market research at Perpetual in Sydney, which manages around $25 billion. Over the past five weeks investors have been disappointed both by the Fed suggesting it may pull back on its bond-buying program and over Japanese Prime Minister Shinzo Abe’s long-term growth strategy, said Mr. Sherwood.
The fear that the Fed could change its monetary policy, along with signs that the U.S. economy is recovering, has encouraged investors to pull money out of emerging markets that are typically perceived as risky.
The resulting outflows have hit some of Asia’s smaller markets the hardest—such as the Philippines and Thailand, which were down 6.8% and 2.1% respectively Thursday. Along with Japan, these markets were previously some of the region’s best performers before the selloff started.
It’s another good reason to re-allocate portfolios regularly since both rapid advances and sharp declines end and provide selling and buying opportunities.