A bear market is a financial market condition characterized by a prolonged decline in prices, typically defined as a drop of 20% or more from recent highs over a sustained period, usually at least two months
. This decline reflects widespread investor pessimism, fear, and a loss of confidence, often accompanied by a weakening economy and falling corporate profits
. Bear markets can occur in overall markets like the S&P 500 or in individual securities or commodities that experience significant price drops
. They are considered the opposite of bull markets, which are periods of rising prices and optimism
. The causes of bear markets vary but often include economic slowdowns, bursting bubbles, geopolitical crises, pandemics, and changes in government policies such as tax or interest rate adjustments
. During bear markets, investors may sell off assets to avoid losses, which can exacerbate price declines
. Bear markets typically go through four phases: starting with high prices and optimism, followed by sharp declines and panic selling, then a phase where some speculators enter, and finally a slow decline where prices stabilize and begin to attract buyers again, leading eventually to a recovery and a new bull market
. The average duration of bear markets has varied historically, with some lasting several weeks and others, like secular bear markets, lasting years or even decades. For example, from 1926 to 2014, the average bear market lasted about 13 months with an average loss of 30%
. For investors, bear markets can be challenging but also offer opportunities to buy valuable stocks at lower prices if they have a long-term perspective. Short-term investors might use strategies like short selling or put options to profit from falling prices
. In summary, a bear market is a significant and sustained downturn in market prices, signaling economic weakness and investor caution, with typical price declines of 20% or more from recent highs
