A bear market occurs when a market experiences prolonged price declines, typically defined as a drop of 20% or more from recent highs. This financial term originated from the way bears attack their prey – by swiping their paws downward.

Bear markets and bull markets represent opposing market conditions. While bull markets show rising prices and optimism, bear markets reflect declining prices and pessimism in the market.

During a bear market, several key events typically occur:

• Stock prices fall consistently
• Trading volume often decreases
• Market sentiment becomes negative
• Investors tend to move to safer assets
• Companies may reduce workforce and spending

Bear markets commonly result from:

• Economic recessions
• Global crises or pandemics
• Major geopolitical events
• Bursting of market bubbles
• Significant changes in monetary policy

The average bear market lasts about 9.6 months, though duration can vary significantly. Historical data shows recoveries typically take 3-4 years to reach previous peak levels.

Most Recent Bear Market: COVID-19 Crash (2020)

• Duration: February 2020 - March 2020
• Trigger: Global COVID-19 pandemic
• Impact: S&P 500 fell 34% from peak
• Recovery: Reached new highs by August 2020 due to government stimulus

Cryptocurrency markets experience their own bear markets, often called "crypto winters." These can be more severe than traditional market downturns, with price drops of 80% or more being common.

Contrarian Investing During Bear Markets:

• Financial Crisis 2008/2009: Investors who bought during the crash saw substantial gains in recovery
• COVID-19 Pandemic 2020: Those who invested during March 2020 benefited from the quick market rebound

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