A bear market is a term used to describe a financial market that is experiencing a prolonged period of declining asset prices. This typically occurs when investors are pessimistic about the future prospects of the economy, companies or specific asset classes. During a bear market, investor sentiment is generally negative, causing the prices of stocks, bonds, and other financial instruments to fall. As a result, investors often become less willing to buy assets, which further exacerbates the decline in prices.
Bear markets can have a significant impact on the broader economy, as investors and consumers become more cautious about spending and investing. They can also create financial stress for individuals and companies that have significant investments in the stock market or other financial markets that are experiencing declines. In contrast to a bull market, where prices are rising and investor sentiment is positive, a bear market is characterized by sustained declines and pessimism among market participants.