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Bear Market

In short

Sustained market decline of 20% or more from recent highs

A bear market is when prices fall 20% or more from their peak and investors are pessimistic. Bear markets are typically shorter than bull markets (average 9-10 months) but feel much longer emotionally.

A bear market officially begins with a 20% decline from a recent high. Causes include recessions, financial crises, rising rates, or earnings disappointments. Average bear market duration: 289 days. Average decline: 36%. Long-term investors who hold through bear markets typically recover and go on to new highs.

Related concepts

  • Bull Market — A bull market is when prices are rising and investors are optimistic. Officially, a bull market begins when the market rises 20% from its low. Bull markets are historically much longer than bear markets.
  • Correction — A correction is a drop of 10-20% — smaller and more common than a bear market. Corrections happen roughly once a year on average. They're painful but healthy — they prevent bubbles from inflating too far.
  • Maximum Drawdown — If your portfolio hit $10,000 then fell to $6,000 before recovering, the max drawdown is 40%. It measures the worst experience a real investor would have endured.
  • VIX (Volatility Index) — VIX is called the 'fear gauge.' When investors are scared, they buy options to protect themselves, which pushes VIX up. VIX above 30 means real fear in the market. Below 15 means complacency. Extreme fear is often a contrarian buy signal.