Stock market basics · updated October 21, 2026
What is a bear market
A bear market is a period in which stock prices fall at least 20% from their last peak. The name comes from the bear, which strikes by swiping its paw downward.
How it works
Analysts use a 20% drop in a broad index from its most recent high. Bear markets often come with a recession, rising interest rates or after a period of very high prices. They end when the index climbs 20% from its low again.
Worked example
An index reaches a peak of 4,000 points, then falls to 3,200.
To get back to 4,000, the index has to rise 25% from 3,200.
Worth knowing
Historically, the US stock market has recovered from every bear market, but sometimes it took years. Selling in a panic at the bottom turns a temporary drop into a certain loss.
When a bear market can fool you
False recoveries: bear markets have 10-15% jumps that look like the end of the fall and are not. You cannot guess the bottom: you only see the low afterwards.
Related terms
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Questions about a bear market
What should you do in a bear market?
For a long-term investor, usually not sell in a panic. Many keep investing their usual monthly amounts, at lower prices.
What does bearish mean?
That someone expects the price to fall. The opposite is bullish.
These explanations are for information only. They are not a recommendation to buy or sell.
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