Coined by investment advisory and asset management firm 4Thought Financial Group, ‘Wolf Markets’ are quantitatively defined as any period of 10% or greater downward price correction, starting with the day of the initial peak price and ending at the day before the initial peak price is reached again. This also includes any period with two consecutive 10%+ downward corrections (excluding periods defined as Bear Markets) with no increase in price from the trough of the first correction to the trough of the second correction (ending after the second trough on the day before the initial price of the first correction’s starting peak is reached). Consequently, Wolf Markets are characterized by volatile/sideways stock prices.
The Four Market Cycles: Bear, Bull, Wolf, Eagle
Bear Markets (Declining stock prices): Quantitatively defined as a period of cumulative price decrease of 20% or greater from the most recent record peak price.
Bull Markets (Rising stock prices):Quantitatively defined as any period that does not meet the criteria for a Bear Market (Anything other than a period of price decrease of 20% or greater from the most recent record peak price. Bull and Bear markets are mutually exclusive by definition).
Wolf Markets (Volatile/sideways stock prices): Quantitatively defined as any period of 10% or greater downward price correction, starting with the day of the initial peak price and ending at the day before the initial peak price is reached again; We also include any period with two consecutive 10%+ downward corrections (excluding periods defined as Bear markets) with no increase in price from the trough of the first correction to the trough of the second correction (ending after the 2nd trough on the day before the initial price of the 1st correction’s starting peak is reached).
Eagle Markets (Rapidly rising stock prices with low volatility):Quantitatively defined as any period exhibiting trailing 1-year returns of +30% or greater without an intervening 10% or greater downward price correction.It is important to note that based on these quantitative definitions of the Bear, Bull, Wolf, and Eagle environments, markets can overlap with each other. With the exception of Bear markets, the other three market types can occur simultaneously. In effect, based on this “overlapping” set of definitions (which have been used to preserve the traditional mutually exclusive definitions of Bull and Bear markets), our newly identified Wolf and Eagle markets can be viewed as subsets or components of the traditional Bull market.
To learn more about “Eagle” and 'Wolf' markets, in addition to the traditional “Bull” and “Bear,” and how select investment methods tend to perform in each environment, Download The Analysis by 4Thought Financial Group CIO Jesse Mackey.
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