A Bear Market is characterized by securities prices falling, anticipation of losses, and widespread pessimism. The typical causes of such pessimism is a weak or slowing economy, high unemployment rate, limited disposable income, reduced business profits, and/or tax rate changes. Overall, there is a major drop in investor confidence for one reason or another. A 20% drop from a peak in one or multiple broad market indexes (S&P 500, DJIA, NASDAQ, etc.) over a 2-month period of time or longer is generally considered entry into bear market territory. Less drastic drops within shorter periods of time are known simply as Corrections.
The opposite of a bear market is a Bull Market, characterized by rising securities prices and optimism. The bulls and bears are metaphors selected by how they attack their prey. Bulls thrust their horns upward, while bears swipe their paws downward. Bull markets tend to last for months and even years. The major US market indexes have seemingly been on a steady uptrend since the low point of the financial crisis in 2009. Recently, many of the top broad market indexes entered into bear market territory. The S&P 500, for example, was down nearly 3% on Monday 12/24, for a total drop of over 20% from its peak in September. That, however, was immediately followed up by a 4.9% gain on 12/26, which is one of the largest one-day moves ever for the index. Only time will tell if this bullish reversal will sustain or if markets will dip lower into bear market territory.
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