What it is
A bear market is characterized by a prolonged period of falling stock prices, often accompanied by widespread pessimism and negative investor sentiment. While there's no official definition, it is commonly understood as a decline of 20% or more from recent peaks in a broad market index, such as the S&P 500, over at least a two-month period. Bear markets are typically associated with economic slowdowns, recessions, or significant geopolitical events that dampen corporate earnings prospects.
During a bear market, investors often sell off riskier assets, leading to further price declines and increased volatility. This environment can present challenges for long-term investors, as portfolio values decrease, but it can also create opportunities for those looking to buy assets at lower prices. News coverage often focuses on the duration and depth of the market decline, as well as potential catalysts for a recovery, such as central bank policy changes or improved economic data.
Why it matters
Recognizing a bear market helps you understand broader market risks and opportunities, informing decisions on portfolio adjustments or new investments.
Reviewed under editorial standardsUpdated September 26, 2026Not investment advice