Finance Dictionary
Bear Market
Definition
A market condition in which securities prices fall and widespread pessimism causes the stock market’s downward spiral to be self-sustaining.
Deep Dive
A bear market is a market condition characterized by a sustained and significant decline in securities prices, typically defined as a drop of 20% or more from recent highs in a broad market index like the S&P 500. This downward trend is often accompanied by widespread investor pessimism, fear, and a lack of confidence, which can create a self-reinforcing negative feedback loop, pushing prices even lower. The underlying economic conditions during a bear market are usually weak, marked by high unemployment, slow economic growth, or an impending recession.
Examples & Use Cases
- 1The stock market crash of 2008, triggered by the global financial crisis, led to a prolonged bear market where major indexes experienced declines of over 50%.
- 2Periods of high inflation and rising interest rates can precipitate a bear market, as investors anticipate reduced corporate profits and consumer spending, leading to widespread selling pressure.
Related Terms
Bull MarketMarket CorrectionRecessionVolatilityInvestor SentimentEconomic Cycle