A bear market happens when investors lose confidence and start selling more than they buy. Prices drop across many companies, not just a few. This often happens during economic stress, weak company earnings, or rising interest rates.
During a bear market, trading may slow down, price swings may increase, and investors usually become more cautious. These periods can last for months or longer, depending on how quickly the economy recovers.
Bear markets are a normal part of financial cycles. They can be difficult, but they also reset prices and create new opportunities once conditions improve.
Knowing how bear markets work helps investors manage risk, stay realistic about expectations, and avoid emotional decisions during market declines.
Common signs include slowing economic growth, weaker company earnings, rising interest rates, or falling consumer confidence. Investors may also see more volatility and more frequent declines across many sectors.
Most bear markets last a few months to around a year, but each one is different. Shorter bear markets often follow sudden shocks, while longer ones usually happen during deeper economic problems.
Many investors diversify their portfolios, reduce exposure to high-risk assets, or move more money into stable areas like cash or defensive sectors. Others continue investing gradually to avoid reacting emotionally to market drops.
A major stock index falls more than 20% from its recent peak. Many companies report lower earnings, and investors pull back, causing prices to stay low for several months.
