Bear Market
A prolonged period of falling asset prices, generally defined as a decline of 20% or more from recent highs, often accompanied by economic pessimism and reduced investor confidence.
A bear market is officially declared when a broad market index falls 20% or more from its most recent peak and the decline is sustained over weeks or months. Bear markets can be triggered by economic recessions, rising interest rates, geopolitical crises, or the unwinding of excessive market valuations.
Bear markets test investor resolve. Portfolio values shrink, negative headlines multiply, and the urge to sell can become overwhelming. Historically, however, investors who stay the course and continue investing during bear markets have consistently recovered their losses and gone on to reach new highs. Bear markets are a normal part of the market cycle.
The duration and severity vary considerably—some last only a few months, others more than a year. Recognising that they are temporary helps avoid the most costly mistake: panic-selling near the bottom.
Disclaimer
This article is for educational purposes only and does not constitute financial advice.