A bear market is a scenario in which prices go down by significant amounts, often defined as a decline of over 20% from the most recent high. Bear markets are thought of as periods of pessimism when investor confidence is low. This can be caused by concerns about the future of the economy, low corporate profits, and negative predictions about future stock prices.
How Bear Market Works?
Bear markets often accompany economic downturns and recessions. They can be cyclical, having the potential to last several weeks or a couple of months, or longer-term, lasting for several years or even decades.
Generally speaking, bear markets do not occur very often. The last one in the United States began in 2007 and lasted until 2009, with the S&P 500 losing 50% of its value. There have been a couple of close calls since, most recently in March 2020.
A decline of 10% is considered a market correction. These are common, happening a few times a year, and are usually short-lived. Market corrections can be caused by a negative economic report or a poor earnings report from a high-profile company.
In a bear market, as prices fall, investors can make money by taking part in short selling and put options, along with inverse ETFs. Although Bear markets can be frightening for investors, markets are positive most of