Bull or bear market? AI spurs rethink of traditional market measures

The volatility of tech indexes is challenging traditional market labels, particularly the bear market definition, which is based on a 20 percent drop in a major index. The Philadelphia Semiconductor Index and South Korea's KOSPI tech-heavy index entered bear markets in July, yet they are still up 46 percent and 25 percent for the year, respectively.

This discrepancy has prompted some to question whether the current terminology accurately reflects the conditions of these volatile markets. Steve Sosnick, chief strategist at Interactive Brokers, suggests that the current labels may not be suitable for indexes experiencing "crazy parabolic runs." He proposes that a decline must exceed the index's one-year historical volatility on an annualized basis to be considered a bear market, which would require the SOX to fall more than 44 percent.

While a new definition may better reflect the volatile nature of these indexes, it is unlikely to be a simpler solution.