Bear Market

A Bear Market is defined by falling prices of at least 20%, a lot of pessimism, and tends not to discriminate with most Sectors and Stocks suffering price declines.

In the Stock Market, a Bear Market defined by market technicians, is when an Index declines by at least 20% from its recent highs. Not the all-time highs of an Index achieved in the past or distant past. A true Bear Market is surrounded by pessimism and negative investors, or “Bears”. A Bear Market can be described by either a Market Index, S&P500 or a Sector Index, for example, Technology. When the Stock Market is in a true Bear Market, the market can experience a prolonged period of price declines. As the stock market enters into a Bear Market, commonly the higher Beta stocks are impacted first.

• What causes a Bear Market?
• What are some initial indications of the pending arrival of a Bear Market? • How could different Stocks or Sectors react?

The causes of a Bear Market could commonly be attributed to a number of factors such as stretched Valuations or a pending economic recession or rising Interest Rates. An initial indication of a Bear Market could be a spike in Volatility as falling prices accelerate as initial fear sets in, the VIX is a good indicator. As sentiment turns there is limited discrimination and most stocks will incur price declines. In general the Defensive Sectors, Utilities, Consumer Non-Cyclical could incur less prices declines. A Bear Market is the polar opposite to the Bull Market.