Bear Market Definition
When most people think of a bear market, they think of a stock market crash. While this can be true, a bear market is defined as a period of time when securities prices fall and remain at lower levels for an extended period of time. Bear markets can occur in any asset class, including stocks, bonds, commodities, and real estate.
There are two common types of bear markets: primary and secondary. A primary bear market is one where the overall stock market is in decline. This happens when there is widespread economic uncertainty and investors lose confidence in the future direction of the market. A secondary bear market happens when a particular sector or asset class experiences a sharp decline while the rest of the market remains relatively stable.
The key characteristic of a bear market is that it is prolonged; typically lasting months or even years. During this time, investors will experience significant losses as asset prices continue to fall. However, it’s important to remember that bear markets are part of the natural ebb and flow of financial markets and they eventually come to an end. For long-term investors, bear markets present an opportunity to buy assets at discounted prices.
