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Will we see an ASX 200 bull market next month?

Despite being in a bear market right now, the S&P/ASX 200 Index (ASX: XJO) could conceivably be back in bull market territory in April.

In the United States, the Dow Jones Industrial Average (DJX: DJI) has re-entered a bull market on the back of a US$2 trillion stimulus package. Things are looking up as President Trump and the US Congress looks to prop up the economy in the face of the coronavirus pandemic.

It’s very hard to read the share market right now. Double-digit share price movements from ASX 200 shares like Afterpay Ltd (ASX: APT) are becoming normal. In fact, this level of volatility is almost unheard of. So, could ASX 200 shares really be back in a bull market as early as next week?

What are bull and bear markets?

The definitions can change a little here. In general, a bear market is when share prices drop 20% or more from their highs in a short space of time. We’ve seen that in March as COVID-19 fears have shutdown economies and sent the ASX 200 crashing as much as 36% lower. 

Similarly, a bull market is when we see a 20% gain from recent lows. Remarkably, that’s the case in the United States right now. Despite coronavirus cases soaring higher around the country, huge stimulus measures are doing their bit. ASX 200 shares have rebounded strongly this week, but we’re not there yet.

The Dow Jones Industrial Average is up 20.99% from Monday’s lows to Thursday’s close. If that doesn’t scream volatility right now, I don’t know what does. But will Aussie shares follow suit in the next week or so?

Will we see ASX 200 shares hit a bull market?

The way things are going right now, it’s hard to pick where ASX 200 shares are heading. I wouldn’t be surprised if we briefly hit bull market territory next month, but I’m not expecting it to last.

There’s only so much stimulus can do at times like these. Countries around the world are facing both an economic and public health crisis. However, that’s not to say I’m totally bearish on ASX 200 shares right now.

I think there are some absolute bargain buys, whether we’re in a bull or bear market. The reality is that if you’re investing for decades to come, the day-to-day movements shouldn’t matter too much.

Stay calm and invest rationally. If you can buy some cheap shares while markets are down then that’s a real win. But don’t start panic buying ASX 200 shares like toilet paper and get caught up in the hysteria.

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As of 17/3/2020

Motley Fool contributor Ken Hall owns shares of AFTERPAY T FPO. The Motley Fool Australia owns shares of AFTERPAY T FPO. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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