What is a bear market?

📘 In Brief A bear market describes a prolonged period of falling prices in the financial markets, typically a decline of at least 20 percent from a recent high. The term comes from the imagery of a bear striking downward with its paw, and stands in contrast to a bull market with rising prices. This phase often arises from economic weakness, rising interest rates, or global crises that shake investor confidence. In a bear market, pessimism and selling pressure dominate, which can reinforce losses as many investors liquidate their positions. It is important to note that a bear market should not be confused with a short-term correction—it usually lasts several months to years. However, for long-term investors, it can also offer opportunities, as many stocks are undervalued, while short-term traders face high loss risks. 🔍 Why This Matters A bear market refers to a prolonged period of falling prices in the financial markets, typically defined as a decline of at least 20 percent from a recent high. This definition applies primarily to stock indices but can also be applied to individual asset classes such as commodities or cryptocurrencies. Unlike a short correction, which often lasts only a few weeks, a bear market usually extends over several months or even years. Common causes include economic recessions, geopolitical shocks, or the bursting of speculative bubbles. Market psychology plays a central role: falling prices increase the willingness to sell, which further accelerates the downward movement. For investors, a bear market typically means …