HomeInvesting LessonsWhat is a Bear Market?

What is a Bear Market?

In the last article on http://what.are.stock.market.corrections, we looked at stock market corrections as well stock correction noting the difference between the collective will of a market versus an individual stock movement.

A stock market correction generally happens when the economy is still doing well and the correction generally lasts for a short period of time.

A bear market in contrast is a sustained correction. A stock market is said to be in a bear market when it declines more than 20% from its last 52 week peak. A bear market is generally associated with economic downturns.

https://www.thebalance.com/what-is-a-bear-market-difference-from-a-bull-3305814

In a bear markets, investors are pessimistic and the sentiment has turned negative.

As per an article in CNBC on Stock Market Corrections, there have been 13 bear markets including the coronavirus bear market in 2020 since World War II till Feb 2021.

Bear markets on an average have happened every 6 years with an average bear market lasting for couple of years.

TheTwigg’s takeaways:

1. Investors should keep tab of the general economic environment to better prepare themselves for any impending bear market

2. Bear markets can be sustained and can lead to losses on an average of 32.5%. Investors should factor this in their risk mitigation strategy

3. Individual stocks can still have bear market type scenarios with some stocks losing their entire value for scenarios such as bankruptcy. Individual stock picking is important in any market.

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