Definition
A Bear Market is a period when the prices of securities are falling, and widespread pessimism causes the negative sentiment to be self-sustaining. This condition is typically marked by a decline of 20% or more in major stock indices over at least a two-month period. Bear markets can occur in any asset class, including stocks, bonds, commodities, and real estate. They are often accompanied by an economic downturn, such as a recession, where unemployment rises, corporate profits fall, and economic indicators are generally weak.
During a bear market, investors' confidence is low, and they are reluctant to buy assets, fearing further losses. This can lead to a vicious cycle where selling begets more selling, and prices continue to plummet. Defensive strategies, such as shifting investments to safer assets like bonds or cash, become more common. For long-term investors, bear markets can be an opportunity to buy quality investments at reduced prices.
