Bear Market
A Bear Market is an extended period of time where the stock
market is in decline of at least 20% from a previous high.
For more than a decade, the market enjoyed an unprecedented period of rising prices, hefty profits and general excitement. (Bull Market) The "bears" are now out of hibernation and here are a few things to keep in mind during this time.
- A bear market is not a market crash.
Market declines are often associated with rapid, catastrophic losses, such as the crash of 1929, the correction of 1987 and even the September 11, 2001 terrorist attacks. Most bear markets are not so dramatic. From January 1973 to September 1974, the S & P 500 experienced a decline of 50%. This did not happen in one swift movement. The process was stretched out over 21 months. - Long-term investors will experience one or more bear markets.
While the 1990's had some lagging periods, the bear market wasn't declared until 2001, following general declines in 2000. - Market timing is no more effective in a bear market than at any
other time.
It is never clear when the declining markets will make the up-turn.
Occasionally, short-term "corrections" do occur, in which the market drops but recovers quickly (1987). These drops set off fears that the market might be heading into a bear period. In such cases it would be a mistake to sell in order to avoid further decline because the market does recover.