What is a bear market?

A bear marketplace is commonly described as a 20% drop from recent highs. The common usage of the term is to consult the s&p 500’s overall performance, that is typically considered a benchmark indicator of the entire stock market.

But, the term bear market may be used to consult any inventory index, or to an individual stock that has fallen 20% or greater from recent highs. For example, we could say that the nasdaq composite plunged right into a endure marketplace at some point of the bursting of the dot-com bubble in 1999 and 2000. Or, let’s say that a particular agency reports negative earnings and its stock drops by 30%. We could say that the stock’s charge has fallen into bear market territory.

The terms bear marketplace and stock market correction are regularly used interchangeably, but they talk to two extraordinary magnitudes of poor performance. A correction takes place when shares fall with the aid of 10% or greater from current highs, and a correction can be upgraded to a bear marketplace as soon as the 20% threshold is met.

Causes of a bear market

The standard cause of a undergo market is investor worry or uncertainty, but there are a large number of viable causes. Whilst the worldwide covid-19 pandemic brought on the most current 2020 bear market, other historical causes have protected extensive investor hypothesis, irresponsible lending, oil charge actions, over-leveraged investing, and more.