What is a Bear Market?
Are bears a good thing? Not if you're lost in the woods. Nor if you want share prices to go up...
Shares rise and fall all the time and it's usually no big deal if for a few days a big market such as London, New York or Tokyo closes lower. But a bear market is something much more grizzly – a lengthy period when the price of shares overall keeps falling, and falling, and falling...
Where have you heard about bear markets?
You'll probably have heard the expression used on money-advice shows on radio and TV and read it in the financial pages. More broadly, it is used in business circles to suggest a downbeat view – being 'bearish'.
What you need to know about bear markets...
There's no cast-iron definition of a bear market – any more than there is of a heatwave or a hard winter – but you tend to know one when you see it.
As a rule of thumb, a 20% drop over two months from the most recent high-point in share prices signals a bear market.
Once the bear is loose, he is difficult to get back in his cage, for the simple reason that people use short selling to make money by betting on further falls.
But thankfully, no bear market lasts forever and, at some point, share prices will pick themselves up again, giving the way to the to the bull market.