In this article, you will learn what is the meaning of slump. The term slump is a metaphorical word that originally referred to a situation where a land surface slides down an underlying slope, often into a body of water or swampy area and usually forming a depression or becoming entirely submerged. We will see what this metaphor means to describe a market situation.
What is the Meaning of Slump?
Slump is a slang term for a sharp decline in business activity, trade, or market values. Slump is a very flexible term in that it is used to describe both a short, sharp decline as well as a more gradual, prolonged period of low activity or value. There are market slumps, economic slumps, industry slumps, earnings slumps, and so on.
In economic terms, slump usually refers to the beginning of a recession. A recession is not officially declared until several months of declining activity have passed, so the months leading up to the declaration of recession are simply described as a prolonged economic slump.
What is the Usage of Slumps?
Slumps apply to financial markets as well. When the stock market enters a slump, share prices and trading volume will usually be lower. This can create investment opportunities for value investors and contrarians, but the investment usually has to be held with a longer time frame in mind. Slumps in the stock market and the wider economy often go hand in hand, but this is not always the case. China's stock market crashed in 2015 and spent the next few years in a slump even while the Chinese economy continued to grow.
Housing market slumps are as widely reported as stock market slumps. These are periods when housing prices in a specific area or region see slowing sales and declining average prices. As with economic slumps, housing market slumps may signal a prolonged period of housing value declosing a market.
One of the more unique usages of the word slump is the Trump slump. The Trump slump referred to the declining number of international visitors and tourists to the United States during his time in office. On the other hand, the Trump bump was a way to refer to the stock market rally that followed his election as President of the United States in November 2016.
Bottom Line
Stock market slumps result in lower share prices and trading volumes, creating an opportunity for contrarians and value investors to buy further. This article is about what is the meaning of slump.
