Term: Bear Market

A bear market describes an extended period where prices across a broad market, or a specific stock, are trending downward. The name comes from the way a bear attacks — swiping downward with its claws — as a visual contrast to a bull, which thrusts upward with its horns.

The commonly cited marker is a decline of around 20% or more from a recent peak, though this is a convention rather than a fixed law of markets, and different sources apply it slightly differently and over different time windows. What matters more than the exact number is the pattern behind it: falling prices, weakening demand, and a general shift in sentiment where investors and traders become more cautious, defensive, or outright pessimistic about future returns.

Bear markets are usually driven by some combination of slowing economic growth, rising interest rates, falling corporate earnings, or a loss of confidence following a shock — a financial crisis, a geopolitical event, a recession. They tend to unfold more slowly than the sharp, panic-driven drops sometimes called crashes, though a crash can occur within a bear market. Trading volume, volatility, and news flow are often elevated during these periods because uncertainty is higher.

The nuance that trips people up is treating "bear market" as a single clean event. In practice they contain sharp counter-trend rallies (sometimes called bear market rallies) that can fool traders into thinking the decline is over, and the exact start and end dates are usually only agreed on well after the fact, once prices have clearly turned. There is also no single universal rule for exactly when a bear market officially begins or ends — the 20% threshold is widely used but not enforced by any regulator.