What is a bear market?

Bear market: A longer period in which prices have fallen 20 percent or more from the top. The opposite of a bull market.

People speak of a bear market when prices have dropped 20 percent or more from their highest point. Such a period often lasts months, sometimes years. Investor confidence is low.

The name comes from a bear swiping its claws downward. The opposite is a bull market.

After a big fall, an even bigger rise is needed to get back to the old level. That is why recovery can take a long time.

Example
An index drops from 1,000 to 750 points. That is 25 percent lower, so a bear market. To get back to 1,000 the index has to rise 250 points from 750. That is a rise of about 33 percent.

Watch out
Nobody knows in advance when a bear market starts or ends. Selling out of fear can turn a paper loss into a real one.

Read more in the guide Why markets sometimes fall without anything really happening.

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