Top 3 Instruments To Trade In A Bear Market

Some analysts believe the markets are rapidly approaching bear territory, while others think we’re already there. Today we’re looking at the best instruments to trade in a bear market. After that, we’ll take our usual plunge into outlining the top fundamental events to watch out for this week.

What’s a Bear Market?

Imagine how a bull or a bear would attack their prey. A bull typically raises its horns upward, while a bear strikes with its claws downward. So, a bear market is one that is trending down for a consistent period of time.

Learn about the bull and bear markets with our animated video.

As a general rule, a bear market is when the overall stock market drops in value by 20% or more from recent highs.

What To Trade When The Market Is Like This?

Bear markets are notoriously tricky to predict and manage. By the time you realise we’re there, prices are already down 20% from their recent highs.

The good news is these things aren’t knee-jerk. The average bear market sticks around long enough to give investors plenty of time to respond. This means that you have time to ​​adapt your trading strategy. But how? Diversification.

There are a few asset classes that are known to rise during market downturns. These include:

#1 Bonds

Fixed-income securities have been used by investors in downturns as they typically rise in value when stocks fall. One thing to watch is US treasuries bonds, as they’re backed by the largest economy in the world. Despite concerns about the financial health of the country, US government bonds are seen as being among the world’s safest.

#2 Precious metals

Gold and silver are both viewed as safe haven assets. This tends to mean that investors flock to them during financial crises, pushing up prices.

As you can see from the chart below, gold is yet to receive a big price swing as a result of increased investment and is still priced relatively well.

XAU/USD

Source: Tradingview

#3 Defensive stocks

Defensive stocks belong to companies that are usually less affected by downturns than the rest of the market. These companies are often those that experience continued demand for their products, despite difficult time.

Defensive stocks include consumer staples like FedEx (FDX), General Motors (GM), and Walmart (WMT).

Do you agree?

What will you be trading in the bear market? Have you already shifted your trading strategy? Let us know by tweeting us at @_Contentworks.

Top Trading Events Week Commencing 27.06.22

We should see quite a busy week in the markets, here are the hottest events for your trading calendar.

Monday

● EUR — ECB Forum on Central Banking

● USD — Durable Goods Orders MoM (MAY)

Tuesday

● EUR — ECB Forum on Central Banking; GfK Consumer Confidence (JUL)

● USD — CB Consumer Confidence (JUN)

Wednesday

● EUR — ECB Forum on Central Banking, ECB President Lagarde Speech

● USD — GDP Growth Rate QoQ Final (Q1), Fed Chair Powell Speech

● GBP — BoE Governor Bailey Speech

Thursday

● CNY — NBS Manufacturing PMI (JUN)

● GBP — GDP Growth Rate YoY Final (Q1)

● EUR — Germany Unemployment Change (JUN); Germany Unemployment Rate (JUN); ECB President Lagarde Speech

● USD — Core PCE Price Index YoY (MAY); PCE Price Index YoY (MAY)

Friday

● EUR — Core Inflation Rate YoY Flash (JUN)

● USD — ISM Manufacturing PMI (JUN)

Here at Contentworks we closely follow market movements and prep content that we think your traders would love to read. Let’s get you started right here.

The Contentworks team