Bear Market — The Dollar Dictionary

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Investment

Bear Market

A period when financial markets fall 20% or more from recent highs, marked by widespread pessimism and selling.

A bear market is officially defined as a drop of 20% or more from a recent peak. It's different from a correction (10-20% drop) in severity and psychological impact. Bear markets are typically accompanied by rising unemployment, shrinking corporate profits, and a general sense that things are getting worse before they get better.

For long-term investors, bear markets are painful but also opportunities. Buying quality assets at a discount — the "stocks on sale" mentality — is how many fortunes have been built. Warren Buffett famously loves bear markets: "Be fearful when others are greedy, and greedy when others are fearful." The hardest part is actually doing it when everyone around you is panicking.

A bear swipes downward with its claws — and that's exactly what a bear market does to stock prices. Think of it like the feeling after a hyped movie drops and everyone's disappointed: sentiment collapses fast. The bear market is when the crowd decides the party's over and starts heading for the exits all at once.

Real world: The COVID-19 crash of March 2020 was one of the fastest bear markets in history — the S&P 500 dropped 34% in just 33 days. But here's the twist: it was also one of the fastest recoveries. By August 2020, the market had hit new all-time highs. Bear markets are terrifying when you're inside them — but historically, they've always ended.

💡 Bear markets test your patience and your nerve — the investors who don't sell are the ones who benefit most when the recovery comes.

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