DEFINITION of a Bear market
A bear market is a condition in which securities prices fall. And widespread pessimism causes the stock market’s downward spiral to be self-sustaining.
WHAT IT IS IN ESSENCE
Investors anticipate losses as pessimism and selling increases. Although figures vary, it is a downturn of 20 percent or more from a peak in multiple broad market indexes. And if it is over a two-month period, is considered an entry into a bear market. Such it happened to the Dow Jones Industrial Average (DJIA) or Standard & Poor’s 500 Index (S&P 500).
When the market is on a falling route with little hope from traders to bring about a recovery, it is referred to as a bear market. This is because those investors who hold a negative view on the market are known as bears.
In a bear market, bearish sentiment has taken hold. And the continued downward impulse in price only gets worse as it fills negativity surrounding the market.
When the opposite happens and optimism abounds, driving the market higher it is referred to as a bull market.
It’s a subject of dialogue among analysts and investors about how sustained and dramatic a market fall has to be considered a bear market.
HOW TO USE
Bear markets are not the only conditions in which markets can fall in price. Corrections are shorter drops that tend to last less than two months. And market crashes are sudden drops in markets that can have devastating results.
The right question is what to do in a bear market.
Don’t be afraid to take some profits. Unload any holdings that you are not comfortable with. Don’t be afraid to hold onto good, quality stocks as they go through the bear.
Expect to be down more than 10% if you have aggressive holdings. If you are down only 5%, great!
Markets go up and markets go down.
Investors tend to think that whatever the current environment is, it will go on forever.
Bull markets will never have a top. Bear markets will never come back up.