Bear Market

The term is thought to come from the way a bear attacks, swiping its paws downwards. Bear markets are often linked to economic recessions, falling corporate profits, rising interest rates, financial crises or major shocks.

For example, if a stock market index falls from 5,000 to 3,800, a decline of 24%, it has entered a bear market.

Bear markets vary in length and depth. Some last a few months; others continue for years. Historically, bear markets have been shorter on average than bull markets, and markets have eventually recovered to new highs, although recovery can take a long time.

During bear markets, many investors become fearful and sell, sometimes at the worst possible time. Those who continue investing regularly or rebalance their portfolios may buy assets at lower prices, which can benefit them when markets recover.

Bear markets can also include sharp temporary rallies, which can mislead investors into thinking the decline has ended. Understanding that bear markets are a normal part of investing can help investors stay calm and avoid making decisions they later regret.