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bear markets 101: what does it mean for you and your wallet?

What’s this about bears in the market? 

If your first thought was to imagine dancing bears prancing on Wall Street, like Dorothy and her crew skipping down the yellow brick road in “Wizard of Oz” – this blog post is for you! 

Here, you’ll get the TL;DR explanation on bear markets, why the economy is taking a downturn, and what you should do with your investments, so you (and your wallet) can make it to the other side of this rainbow where gas prices soar, unscathed. 

Lions & tigers & bears, oh my! – let’s get started!

[PS. Penny’s founder & CEO, Crissi, is talking 'bout this live on Instagram. Watch and listen here.]

👀: 6min read

stock market

📸: Pinterest

What’s a bear market?

If you’ve been tuning in to the news, you probably heard something about the “bear market” (and how the economy’s going to sh**t…*or is it?) 

That’s mostly because:

Right now, as this post is published, the US stock market is down 20% due to inflation, rising rates, and post-COVID-19 blues.

Does that mean a bear market is a recession? 

Nope – a bear market is the step before a recession. (aka not as bad as a recession, but not great.) 

It’s called a “bear market” because the economy has slowed down, like a bear in hibernation.

Think of it this way: 

A bear market has the vibe of a lazy Sunday afternoon. It’s still strutting along somewhat, maybe taking a nap or 2 along the way – but it’s a far cry from its “usual” power workout + green smoothie energetic morning combo. 

So, not a recession. But not “full steam ahead” either. 

And when it comes to the economy, any kind of dip in growth is bound to raise eyebrows. But there’s no need to fear: not every “low” is bad. In fact, it could be really, really good – especially for your wallet!

Does a bear market mean the economy is in a bad place? 

Not necessarily! 

A slow economy isn’t always a bad thing. For a few reasons: 

  1. A bear market is normal and expected.

We expect 2 big dips every 10 years (so 8 “good” years and 2 “bad” years). 

So in the grand scheme of things, slow turns like bear markets and recessions are totally expected, and part of the natural economic “market flow.” 

  1. A stock market low doesn’t always mean the economy is bad. 

The stock market reflects how certain companies are doing (not people). 

When companies make less money – which they have been – it leads to investments and the stock market temporarily going down in value. 

However, the stock market isn’t the only sign of financial highs and lows. 

If you look at the unemployment rate for example, it’s very low at 3% right now – but it was 15% in 2020 when COVID-19 hit. So, most people have jobs and are making money. 


Cost of living is higher (aka, people are making money, but spending less) and the interest rate to borrow money is higher – which means companies make less money (aka, less profit and more dips for the stock market). 

For the record: 

Over the past 10 years, the US stock market is up by 150% (ONE-FIFTY!!!) – so ya, the 20% dip this year doesn’t even make a dent in those 150% returns. 

  1. This downturn is happening for a reason. 

As scary as it sounds, this economic downturn is necessary. The US government purposefully increased interest rates to slow things down and fight inflation

Here’s a crash course:

The stock market was up almost 30% last year. Interest rates were super low. Money was cheap. And companies were doing well overall. 

All this combined? 

It caused the price of things to soar waaay up. One trip to the grocery store suddenly cost nearly double. (Don’t get us started on gas!)

So, the government intervened by raising interest rates. 

Because who needs to borrow more money than anybody else? Companies and organizations that need capital to grow and invest in their services and products, of course!

There’s more to it, yes. 

But that’s the driving force pushing this 2022 bear into hibernation: Prices started to soar. Now, it’s time to hit the breaks – so inflation doesn’t spiral out of control. And we can reduce the cost of everyday things. Like bread, gas, and donno… Air? 

Now that you get what’s happening (and why) – it’s time to cut to the chase: what does that mean for you? 

Should I buy or sell my house?

For most people, it’s actually a better time to buy a house right now. 

The housing market is going through a reset now, too. 

Over the past couple years, home prices went higher and higher. Again, money was cheap. And interest rates for homes and mortgages were low, around 2%. Now, interest rates are closer to 5% – more than double! – so, less people are buying homes (and home prices started to go down). 

So, even though rates are higher than before, it’s become more of a “buyer’s market” where extra-competitive pricing is becoming the new norm. At least for now.

Should I sell my investments? 

No, no, NO! You’ll miss out on all the upside! 

Again, the economy works in cycles. Stocks grew by 150% over the last 10 years, and this 20% dip is nothing to be afraid of. In time, stocks will go up again

In fact, now is the BEST time to get invested! 

You can buy low, and sell high. Buy stocks now when the market is temporarily down. When the market rebounds, you’ll win a nice chunk of change.

However, DO invest for your age. 

If you’re 60 and nearing retirement: Invest, but don’t put 100% of your savings in the stock market. You’ll need your money soon, so you don’t want to get stuck in this exact situation, where a 20% dip might actually impact your wallet. 

If you’re 20 or 30 or 40 – or even 50: Stock UP! You still have many, many years to make up that 20%, probably multiple times over. Just remember to diversify your investments: for example, buy bonds in addition to stocks. And so on. 

Need to learn how to (safely) invest in the stock market? Join Penny! Our 101 investing module teaches you how to do just that (in less than 1 day). Sign up here

What else can I do in this bear market? 

Bear markets can be scary. Paired with news about wars, economic downturns, and possible recessions? Freaking terrifying. 

But now you know, this one’s a friendly bear. It’s meant to fight inflation, so we can afford things like food and gas without losing our minds. 

Next time you read the news, don’t fret. 

Here are 5 things you can do (and look forward to) to survive these bear-y scary times with a happy wallet, and a confident pep to your step: 

1. Stay invested, or get invested. Don’t let this scare you away from growing your wealth. In fact, it’s the best time to buy. 

2. Get excited! The price of everyday things will finally go down. It may not be immediate, but sunny skies are ahead. 

3. Make your money work for you. Put your savings in a high yield savings account. Plan your future money moves. Pay off debt. So much you can learn and do! 

4. Buy that house! Interest rates increased, but it’s a buyer’s market out there. If your wallet’s ready for it, go for it. 

5. Keep your job. Now is not the time to quit. Unless you have at least 1 year of emergency savings, it might be a risky move. 

And remember: Penny is here to support you for that ever-changing life. Whether it’s investing, home-buying, or how to pay off debt – we got your back with affordable financial advice for women.


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