Lexicon
Bear Market
When the mood, and the tape, turn sustainedly negative.
A bear market is a sustained decline in broad market prices, conventionally defined as a drop of 20% or more from a recent peak, usually accompanied by widespread pessimism and falling confidence in the economic outlook.
The 20% threshold is a convention, not a law of physics, and different observers draw the line slightly differently. What distinguishes a bear market from an ordinary pullback is less the exact percentage than the duration and breadth of the decline — a bear market tends to grind on for months, often accompanied by genuinely worsening economic news, rather than resolving in a matter of days or weeks.
Bear market vs. correction vs. crash
The vocabulary around declines gets used loosely, but the distinctions are useful. A correction is a decline of roughly 10% to 20% and is common even in otherwise healthy markets. A bear market is the deeper, more sustained decline of 20% or more. A crash refers specifically to speed — a sharp, fast drop over days rather than months — and can occur inside either a correction or a bear market. The three describe different things: correction and bear market describe how far prices fell, crash describes how fast.
The part investors get wrong
There's no bell that rings at the bottom of a bear market, and by the time economic news turns convincingly positive again, a meaningful part of the recovery has often already happened. The behavioral mistake bear markets create isn't entering them — that's unavoidable if you own stocks — it's exiting near the bottom out of fear and missing the recovery that follows.