What characterizes a bear market?

A bear market is characterized by a decline of 20% or more in stock prices. This significant drop indicates a prolonged period of reduced investor confidence and is often linked to adverse economic conditions. In a bear market, investors typically expect further declines, which can lead to decreased spending and investment, creating a cycle that prolongs the downturn.

Recognizing this definition is crucial for investors and individuals in personal finance, as it can influence investment strategies, risk assessment, and market entry points. By understanding this term, one can better navigate their financial planning and investment decisions in reaction to broader market conditions.