What is a bear market?

A bear market is a market condition defined by decreasing stock values and negative investor sentiment.

If the prices of securities decline by 20% or more from their previous record, the market is said to be in a bear market.

During a bear market, investors are unsure that the market will quickly recover, so they sell their assets to avoid suffering a loss while the price falls. As numerous investors sell, prices fall even further, triggering a vicious selling spiral that thrives on its own, driving prices even lower.

The word “bear market” contrasts with the term “bull market,” which alludes to an economic situation in which the price of traded on the exchange commodities is rising. Bull markets are frequently steady and gradual, but bear markets are frequently quick and abrupt.

There are numerous ways for a bear market to occur. Bear markets are frequently precipitated by a single event, such as the COVID-19 epidemic.

In other circumstances, after a prolonged period of economic growth, some investors will begin to sell their stocks in order to benefit.

The Nasdaq is currently a clear illustration of a bear market, with a 25% YTD loss.

If you would like to fully understand the bear market and its implications, or what you should be doing as an investor, book a free consultation with us.