A bear market describes a phase in financial markets during which prices decline persistently over an extended period. A drop of around 20% or more from a recent peak is commonly used as a benchmark to define a bear market.
During such periods, market sentiment is predominantly pessimistic, confidence in rising prices diminishes, and many investors tend to reduce their exposure to risk. Bear markets can be triggered by various factors, including recessions, geopolitical crises, rising interest rates, or a loss of confidence in entire sectors.
The term “bear” is derived from the way a bear attacks—by swiping its paw downward. Its counterpart is the bull, or bull market, which symbolizes rising prices.
