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Comparison of Apples-to-Apples In addition to providing a snapshot of the market and an indicator of market trends, indexes enable the comparison of “apples-to-apples” data for answering such important questions as: How are one country’s stocks performing compared to another country’s, such as Japanese stocks vs. U.S. stocks or Eurozone stocks vs. Indian stocks. How are stocks in one sector performing compared to another sector, such as energy vs. manufacturing? How are stocks in one industry performing compared to the stocks of another industry? How are the stocks of different size companies performing, such as the stocks of large cap companies compared to mid-caps? Boats, Bulls, and Bears In the last lesson, you learned that one of President Kennedy‘s favorite sayings was “A rising tide lifts all boats...” Engage students in a discussion: You were asked to ponder whether this is an accurate metaphor for the stock market. Any ideas? The long held cliché that a rising tide lifts all boats as applying to the stock market has largely been disproven. Generally, stocks move up and down independent of one another . Investors who buy stocks relying the whole market to rise and carry their investment along with it, are often disappointed. Nevertheless, the market as a whole, or segments of the market often react to good or bad news or events with stocks moving in unison according to the market mood . Most experts recommend, however, that stocks be selected on their own merits and after careful analysis of technical and fundamental data, not picked on the hope that a tide will sweep the market and lift the value of all stocks. There is however, real and reliable market phenomena called a bull market and bear market . When the stock market as a whole, or stocks of a particular sector or industry trend up for an extended period of time, it is called a bull market . When the stock market as a whole, or stocks of a particular sector or industry trend down for an extended period of time, it is referred to as a bear market . These trends can last for months or even years. A bull market is often accompanied by an overall investor optimism and uptick in consumer spending . A bear market may be accompanied by unemployment , (overall or within the particular sector or industry experiencing the downturn), falling investor confidence , or a sell off of stock by investors who want to preserve their profit. It’s possible that one sector of the market, such as industrials can be experiencing a bull market charge, while another such as energy , is in a bearish retreat. This proves that a rising tide may not float all boats! SLIDE 16J PRODUCT PREVIEW
Lesson 16 | Bulls and Bears and Boats, Oh My! 306
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