A bear market is when the price of an investment falls over time. It occurs when prices drop 20 percent or more from their 52-week high. A bear market can start with a stock market crash which is when prices plummet 10 percent in a day or two. It's much worse than a stock market correction as a bear market usually lasts longer.
How to Recognize a Bear🐻 Market
A bear market occurs when the major indices continue to go lower🛑 over time. They will hit new lows than previously seen before. More importantly, their highs will be lower than before as well. 🐔🐓The average length of a bear market is 367 days. The conventional wisdom says it usually lasts 18 months but bear markets can last much longer. Bear markets occurred 32 times between 1900 and 2008, with an average duration of 367 days⏰. They typically happened once every three years.
Bear markets are accompanied by recessions. 🚦🌩That's when the economy stops growing and then contracts. Recessions cause layoffs and high unemployment rates which put the economy in a more downward spiral.
How to recongnize a bear market?👀
You can recognize a bear market if you know where the economy is in the business cycle🌬🌐. If it's just entering the expansion phase, then a bear market is unlikely.
But if it's in an asset bubble or investors are behaving with irrational exuberance, then it's probably time for the contraction phase and a 🐻bear market. In 2018, we were in the expansion phase of the current business cycle.