- Stage 1 (Market Topping) – Bubble bursts, euphoria gives way to selling
- Stage 2 (Pricing in higher interest rates) – Asset prices decline to price in the higher risk free rate
- Stage 3 (Pricing in lower earnings) – Rising interest rates start to weigh on the economy, resulting in lower consumer spending and corporate earnings
- Stage 4 (Panic Deleveraging) – Investors flood for the exits, creating liquidity problems
It’s been a while since I did a macro post on Financial Horse.
I’ve also been getting quite a few queries on how to invest as a long term investor.
So let’s remedy that today.
4 Stages to a Bear Market
As shared a while back, there are 4 stages to a bear market: