A bear market is a situation in the financial market where there is a prolonged decline in investment prices. Typically, this occurs when a broad market index, such as the S&P 500, falls by 20% or more from its recent high. In contrast, a bull market is characterized by a rise of 20% or more in market prices.
During a bear market, investors may be pessimistic about the future prospects of the economy and choose to sell their investments, leading to a further decline in prices. This negative sentiment can continue for an extended period, making it challenging for investors to make profitable investments.
Conversely, a bull market is a period of sustained growth in investment prices, driven by positive economic conditions, and investor optimism. In such a market, investors are often eager to purchase stocks in anticipation of further gains.