A bear market is a sustained downturn in a financial market such as the stock market. On Wall Street, home to markets like the New York Stock Exchange and the NASDAQ, bear market territory is traditionally marked by a 20 percent downturn in stock prices over a two-month period. This is not to be confused with a market correction, which is a short-term price decline rather than a sustained downward trend.

The opposite of a bear market is a [bull market](https://www.masterclass.com/articles/bull-market-explained), which involves steady growth in market values. Long-term bull markets, sometimes called secular bull markets, can result in all-time high stock prices. High stock prices can cause an overheated market, which can lead to a sell-off of stocks, prompting a bear market.
There are two principle types of bear markets: cyclical and secular. A cyclical bear market is a short-term bear market that periodically occurs due to normal market volatility and lasts for months. A secular bear market covers a multi-year period (typically 10 to 20 years) wherein market prices underperform their average gains. 

During a secular bear market, a bear market rally may occur that makes it seem as though prices are rebounding when, in fact, they are serving as a correction to a still-declining market. An infamous bear market rally occurred shortly after the stock market crash of 1929. The Dow Jones Industrial Average (DJIA) briefly rallied, causing investors to believe a new bull market had begun. In fact, the rally was just a correction, and stocks sank again toward a new market bottom; this helped set off the Great Depression.

A few recurring characteristics define bear markets.

1. __Diminished investor confidence__: Financial markets tend to produce self-fulfilling results. When investors lack confidence in a market, they pull their funds, which causes the market to further depress.
2. __Fluctuating interest rates__: Interest rates set by central banks can stimulate an economy and regulate [inflation](https://www.masterclass.com/articles/what-is-inflation-in-economics). When interest rates rise too rapidly, bond markets thrive, but stock markets may enter bear territory.
3. __A rise in short selling__: In bear markets, professional investors may resort to short selling, puts, and inverse exchange-traded funds (ETFs). All of these financial maneuvers involve a bet that the stock market will continue to go down. Short selling is risky for individual investors, and it can further tank declining markets.
4. __A decline in IPOs__: An initial public offering (IPO) happens when a private company decides to become publicly traded on a stock exchange. In a bear market, going public can lead to diminished company value. Businesses may opt to remain private until a bear market transitions back into a bull market.
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Financial markets rise and fall over the course of economic cycles. When prices fall continuously over a period of time, the phenomenon is described as a bear market.


Financial markets rise and fall over the course of economic cycles. When prices fall continuously over a period of time, the phenomenon is described as a bear market.


Bear Markets Explained: 4 Characteristics of a Bear Market

A bear market is a sustained downturn in a financial market such as the stock market. On Wall Street, home to markets like the New York Stock Exchange and the NASDAQ, bear market territory is traditionally marked by a 20 percent downturn in stock prices over a two-month period. This is not to be confused with a market correction, which is a short-term price decline rather than a sustained downward trend.The opposite of a bear market is a <a href='https://www.masterclass.com/articles/bull-market-explained' target='_self' class='mc-text--link' data-mc-segment-trigger='true' data-mc-segment-event-type='Article Page Click' data-event-obj='{"textTag":"p","href":"https://www.masterclass.com/articles/bull-market-explained","linkCopy":"bull market","category":null}'>bull market</a>, which involves steady growth in market values. Long-term bull markets, sometimes called secular bull markets, can result in all-time high stock prices. High stock prices can cause an overheated market, which can lead to a sell-off of stocks, prompting a bear market.

What Is a Bear Market?

There are two principle types of bear markets: cyclical and secular. A cyclical bear market is a short-term bear market that periodically occurs due to normal market volatility and lasts for months. A secular bear market covers a multi-year period (typically 10 to 20 years) wherein market prices underperform their average gains.

Cyclical vs. Secular Bear Markets: What’s the Difference?

During a secular bear market, a bear market rally may occur that makes it seem as though prices are rebounding when, in fact, they are serving as a correction to a still-declining market. An infamous bear market rally occurred shortly after the stock market crash of 1929. The Dow Jones Industrial Average (DJIA) briefly rallied, causing investors to believe a new bull market had begun. In fact, the rally was just a correction, and stocks sank again toward a new market bottom; this helped set off the Great Depression.

What Is a Bear Market Rally?

A few recurring characteristics define bear markets.<ol class="mc-m-4"><li class="mc-my-4"> 1. Diminished investor confidence: Financial markets tend to produce self-fulfilling results. When investors lack confidence in a market, they pull their funds, which causes the market to further depress. </li><li class="mc-my-4"> 2. Fluctuating interest rates: Interest rates set by central banks can stimulate an economy and regulate <a href='https://www.masterclass.com/articles/what-is-inflation-in-economics' target='_self' class='mc-text--link' data-mc-segment-trigger='true' data-mc-segment-event-type='Article Page Click' data-event-obj='{"textTag":"p","href":"https://www.masterclass.com/articles/what-is-inflation-in-economics","linkCopy":"inflation","category":null}'>inflation</a>. When interest rates rise too rapidly, bond markets thrive, but stock markets may enter bear territory. </li><li class="mc-my-4"> 3. A rise in short selling: In bear markets, professional investors may resort to short selling, puts, and inverse exchange-traded funds (ETFs). All of these financial maneuvers involve a bet that the stock market will continue to go down. Short selling is risky for individual investors, and it can further tank declining markets. </li><li class="mc-my-4"> 4. A decline in IPOs: An initial public offering (IPO) happens when a private company decides to become publicly traded on a stock exchange. In a bear market, going public can lead to diminished company value. Businesses may opt to remain private until a bear market transitions back into a bull market. </li></ol>

4 Characteristics of a Bear Market

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Financial markets rise and fall over the course of economic cycles. When prices fall continuously over a period of time, the phenomenon is described as a bear market.