Bear Market

by jessica sa Digital Marketing Expert

A condition in which the price of securities fall by 20 percent or more from recent highs amid the widespread pessimism and negative investor sentiment is referred to as bear market. Typically, they are associated with declines in an overall market or index. Individual securities or commodities can be considered to be a in a bear market if there is a decline of 20% or more over a sustained time period like two months or more. For example, bear market occurred in the United States between the year 2007 – 2009 during the Financial Crisis which lasted roughly for 17 months.

Bear markets can last for several years or weeks. A secular bear market could last for 10-20 years and is characterized by below average returns on a sustained basis.

What causes a bear market? A weak or slow/ sluggish economy will bring with it a bear market showing signs like typically low employment, low disposable income, weak productivity and a drop in the profits of a business. And also, any intervention by the government in the economy also triggers bear market.

For example, variations in the rate of tax or in federal funds rate can lead to bear market. Likewise, a drop in the investor’s confidence may also show the onset of a bear market.

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