As the opposing sibling term to a bull market [1], the bear market [2] indicates a downward turn of the economic indicators both in the financial world and in general. While the term can be applied to any sellable commodity [3], it is most commonly applied to stock market fluctuations. The prices of securities [4] fall during this market trend and pessimism related to the overall financial situation often results in a self fulfilling prophesy where conditions fail to improve.
Investors expect to lose money during a bear market, and as more securities are sold off, the cycle continues its downward trend. A rule of thumb financiers apply is that if there is a downturn of 20% or more in a number of broad market indexes during a period of two months or more then a bear market is “declared.” Other signs of a bear market are an increase in unemployment an economic recession [5] or a rapid rise in inflation [6].
A bear market is not the same thing as a correction, which is considered a short term trend. Corrections can help a new investor plan when to enter the market, whereas a bear market provides no such advantage. A correction period is followed by a period in which stock prices rise once again.
Purchasing new stocks during a bear market is a questionable proposition. It is challenging for an investor to make any significant profits unless they pursue investing as a short seller.
The most well known bear market was the Great Depression of the 1930s, it took World War II to bring that particular bear market to an end.