Definition
Bear markets are the counterpart to bull markets — extended declines driven by combinations of recession, valuation reset, credit stress, or exogenous shocks. Post-WWII US bear markets have averaged about 14 months and roughly −33% peak-to-trough. Shorter, sharper bear markets (the 2020 COVID drop was −34% over just 33 days) can also occur outside normal cycles. Investor psychology is a defining feature: fear replaces greed, forced selling begets more selling, and previously enthusiastic narratives are questioned. Bear markets often produce the best long-term entry points for patient investors — but calling the bottom in real time is impossible.
Example
The 2008 financial crisis produced a bear market from October 2007 (S&P 500 at ~1,565) to March 2009 (~676) — a decline of about 57% over 17 months. Investors who bought at the March 2009 low and held saw quadruple returns by 2019.
Frequently Asked Questions
How is a bear market different from a correction?
A correction is a decline of 10–20% from recent highs. A bear market is 20% or greater. Corrections are more frequent and usually reverse within months; bear markets can last a year or more.
Should I sell during a bear market?
Selling into fear locks in losses. Historical data shows the best returns often come from remaining invested through bear markets and continuing to buy at lower prices via regular contributions.
How do you know when a bear market has ended?
You don't know in real time. The end is only visible retrospectively when the index has clearly resumed a sustained uptrend. Many investors define the end as a new all-time high, but bulls often start well before that.