What is a bear market?

One definition of a bear market says markets are in bear territory when stocks, on average, fall at least 20% off their high. But 20% is an arbitrary number, just as a 10% decline is an arbitrary benchmark for a correction. Another definition of a bear market is when investors are more risk-averse than risk-seeking.

Do bear markets signal a potential economic downturn?

Bear markets happen fairly often and are part of the economic cycle, but it does strongly signal a potential economic downturn. There are many causes of a bear market, such as geopolitical risks and market bubbles bursting, and each bear market is unique in how far the market may drop and how long it may last.

Is a market correction a bear market?

A market correction is often incorrectly used as a synonym for a bear market. The key difference between a bear market versus a market correction is the level of price decline and the duration. A market correction is a decline of at least 10%, but less than 20%, from a recent high, and often lasts for weeks.

How long does it take to fall into a bear market?

On average, it took eight months to fall into a bear market and 13 months to go from peak to trough. In other words, the market continues to fall on average for another five months after entering bear market territory before we see a bottom.