bear market
In financial markets, a bear market is a period during which prices fall consistently. The term most often refers to the stock market, although it can apply to other markets, including bond prices, the value of real estate, and cryptocurrencies, which have seen several severe downturns since their inception in the early 2010s.
A “bear” is an investor who expects prices to decline and positions their portfolio accordingly. The term may derive from the proverb about “selling the bearskin before one has caught the bear” or perhaps from selling when one is “bare” of stock.
Bear market vs. bull market
A bear market is generally defined as a drop of 20% or more from a recent high in a major financial benchmark such as the S&P 500. Its counterpart, the bull market, is a period of rising prices. Learn more about bull and bear markets.
Common signs of a bear market
Bear markets often arrive with—or ahead of—economic downturns. Typical warning signs include:
- Companies report lower earnings, with falling revenue or shrinking profit margins.
- Consumers are cutting back spending, especially on discretionary items.
- Job creation has slowed down or begun falling, and the unemployment rate is climbing.
- Traders are selling stocks or shifting to defensive assets like gold or Treasury bonds, or so-called “defensive sectors” such as consumer staples and utilities.
- Market volatility increases and investor sentiment turns negative.
Bear markets may be triggered by economic slowdowns, geopolitical uncertainty, or sudden shocks like financial crises or pandemics. They can last a few months or stretch over several years, depending on the underlying causes.
For example, the COVID-19 pandemic triggered a rapid bear market in early 2020, but markets recovered within months. In contrast, the 2007–09 bear market, which was brought on by the global financial crisis, was much deeper and long-lasting.
Bear market strategies
Although bear markets can be unsettling, whether you’re an active trader, long-term investor, or somewhere in between, you don’t have to sit them out. Here are several strategies that can help you navigate—or even profit from—a down market:
The bottom line
No matter where you are in your investing journey, a bear market can test your patience and confidence. But bear markets are also a normal part of the economic cycle. Although it’s tempting to panic during a downturn, staying focused on long-term goals—and using the right tools—can make all the difference.
Investors who understand how bear markets work are better prepared to ride them out, rebalance their strategy, or even spot opportunities hidden in the fear.