A bear market is a market condition characterized by falling prices and pessimism. The common definition is a decline of 20 percent or more from recent highs. It can last months or years. Investors sell, prices drop further, and fear feeds on itself. The opposite is a bull market, where prices rise and optimism prevails.

Bear markets have many causes. Recessions, rising interest rates, geopolitical crises, and bubbles bursting all trigger them. The 2000 dot-com crash, the 2008 financial crisis, and the 2020 pandemic selloff were bear markets. Each looked different, but the pattern was familiar: denial, fear, capitulation, and eventually recovery. The recovery is never guaranteed to be quick.

Bear markets are painful but not permanent. Investors who sell at the bottom lock in losses. Those who hold or buy often recover over time. The hard part is emotional. Watching a portfolio drop 30 percent tests patience. History shows that markets eventually recover, but the timing is unpredictable. The average bear market lasts about nine months. Some drag on for years. No one knows in advance which kind is coming.

Common features

• Falling prices
• Investor pessimism
• Increased volatility
• Rising unemployment
• Eventual recovery