Securities
Bear Market
A bear market is a financial market condition characterized by falling prices, investor pessimism, and negative sentiment, typically defined as a 20% or greater decline from recent highs.
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Exam Tip
Bear = DOWN (claws swipe down). 20% decline = official bear market.
What is a Bear Market?
A bear market is a period of declining prices in a financial market, typically characterized by a drop of 20% or more from recent highs. Bear markets are often accompanied by economic recession and high unemployment.
Characteristics of Bear Markets
| Indicator | Bear Market Sign |
|---|---|
| Price Trend | Falling prices (20%+ from highs) |
| Investor Sentiment | Pessimistic, fearful |
| Economic Conditions | Recession, rising unemployment |
| Trading Volume | High selling activity |
| Corporate Earnings | Generally declining |
Bear Market Phases
- Distribution - Smart money sells, public still buying
- Panic - Sharp drops, widespread selling
- Stabilization - Selling exhausts, bottom forms
Historical Bear Markets
| Period | Duration | S&P 500 Loss |
|---|---|---|
| 2007-2009 | 17 months | -57% |
| 2000-2002 | 31 months | -49% |
| 2020 (COVID) | 1 month | -34% |
Why "Bear"?
The term comes from how a bear attacksâby swiping its claws downward, symbolizing falling prices.
Bear Market Strategies
- Don't panic sell
- Consider defensive stocks (utilities, healthcare)
- Look for buying opportunities
- Maintain diversification
- Review risk tolerance