Bear Market
A market in which share prices are falling, thereby encouraging selling.
When a market is on a sustained downward trajectory, it can be characterised as a bear market, given that it is ‘bears’ – investors with a pessimistic view of the market – that are seen to be in control. A bear market is one in which downcast sentiment about the market’s prospects results in more people selling than buying, which drives down share prices, thereby sustaining the pessimism.
Who are ‘bears’?
Bears are traders that expect the market to head in a downward direction rather than an upward one – meaning they hold the opposite view to bulls. As bears anticipate that a market will soon drop in value, they attempt to profit from this by selling.Practical Application Example
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The most famous bear market to occur in America lasted from September 1929 to June 1932, with the stock market crash of 29th October 1929 marking the start of the Great Depression. The S&P 500 saw an 86% fall in less than three years, and took until 1954 to regain its previous peak. ”
