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Bear Market

A bear market, or a bear run, represents a time period during which prices of securities or assets are depreciating. There are several causes of a bear market, with the most common ones being geopolitical tensions, a slowing economy, pandemics, and more.

Generally, a bear market occurs when a broader market index plummets at least 20% from its latest peak. Both broader markets, such as the S&P 500, and individual securities can enter a bear market. 

Although the 20% is the common threshold, indexes and stocks usually decline much more than that level over a prolonged time period. While bear markets generally trend downwards, it is common to see a couple of “relief rallies” during a bear market, which leads to a temporary price rebound.

Once securities find their bottom in a bear market, investors tend to start buying them at more affordable prices, which usually marks the end of a bear market and the start of a bull market. During bear markets, nearly all securities within that market are declining despite reporting positive news and achievements due to low investor confidence.

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Author: Mircea Vasiu Updated: July 8, 2022