A bear market is a condition in the stock market where there is a prolonged period of falling stock prices, typically defined as a decline of 20% or more from a recent high. It is the opposite of a bull market, which is a prolonged period of rising stock prices.
During a bear market, investors are typically pessimistic about the future of the economy and the stock market, and they tend to sell their stocks, which causes prices to fall further. This can lead to a negative feedback loop where lower stock prices lead to more selling, which leads to even lower stock prices.
Bear markets can be caused by a variety of factors such as economic recessions, high unemployment, rising interest rates, inflation, or political and geopolitical events. They can last for months or even years, and can result in significant losses for investors.
It’s important to note that bear markets are a normal part of the economic cycle and they happen periodically. However, they can be difficult to predict and can cause a significant financial loss to investors who are not prepared. It’s also important to note that a bear market doesn’t affect all stocks or sectors in the same way, some will be less affected or even benefit from it.