Bear Market

Financial Dictionary -> Investing -> Bear Market

A bear market is a market trend where the market place is on a negative downward spiral. It is the opposite of a bull market which is a rapid boom in the market. The term is mostly applied to the stock market and other similar financial markets.

Typical features of a bear market include financial securities losing their value, lots of negative speculation and panic, a lack of trust and a general cynicism in the air. Lots of people rush to sell their shares and securities to save what little value they have left. This may start with just a small value drop and a few people 'chasing out' which sparks a huge wave as everybody else panics and follows suit.

The famous Wall Street Crash in the late 20's early 30's is probably the most well known bear market occurrence.

There are no strict parameters for what constitutes a bear market, although some analysts suggest that if the market sees a decrease of around 20% from a broad range of companies on the stock market, that remains this way for two months or more, should be considered the start of a bear market.

A bear market is usually considered a long term downturn. A short term downturn is more commonly known as a correction, which has a total duration of two months or less, rather than two months or more.

A bear market will normally happen when the economy itself is in some form of recession or economic crisis, with other downturns like falling house prices, high inflation, lots of unemployment and banking panic.

The name itself is believed to have come from early sellers of bear skin, who traded the product under the belief that its value would see a downturn in the future.

Some went as far as to call the 2008 economic crisis a bear market.