Bear Market

What is a bear market? A bear market is a directional decline in the stock market over an extended period of time in the primary trend. A downtrend is lower lows and lower highs.

A bear market is also a condition, it is a transition from high investor optimism to widespread investor fear and pessimism. As investors expect further price declines and losses, they remain pessimistic and “bearish.”

A bear market is driven by fear and pessimism, which can be measured by investor sentiment polls and indicators.

How do we determine if we’re in a bear market?

There can be many qualitative definitions of a bear market, one generally accepted quantitative measure is a price decline of 20% or more. A market crash is a dramatic decline in prices across a broad range of assets. Bear markets may include market crashes.

Another way to quantitatively measure and define a bear market is breadth, which is the degree individual stocks are participating in a decline. In a bear market, most stocks are in a downtrend.

historical bear market chart

For a list of stock market crashes and bear markets starting in 1623, click here.


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