What is a Bear Market

A bear market is a constant decrease in the value of the stock market over a period of time, leading to a state of uncertainty and anxiety. It goes along with a downturn in economic growth, inactive credit markets and a high unemployment rate. Many bear markets have existed over the past years, some stand out as the most erratic experience in the global economy.

The history of the bear market can be trace back to the 1929 Wall Street downturn, which marked the beginning of the most eminent bear market. Losing about 89% of its worth and placing the market in bad conditions that were never experience in time past, the crisis lasted from 1930 to 1932 and did not fully regain its stand until 1954. The 1987 Black Monday downturn was not an exception, as it was caused by poor market projections and human irrationality; however, it was recorded as one of the greatest loss ever that took place in a single day. The 2008 downturn, having a single day drop of over 777 points, symbolizes the greatest decline in worth since the 1929 downturn. It was caused by bank breakdown due to deficient loan-backed securities.

Historians are uncertain where the word “bear” appear from in the bear market. As many theories have tried to address this issue, most people believe that a bear is a slow and cautious moving animal, leading to the modification of the word to depict the market. Others believe that the word “bear” originated from the English traders selling bear skins before they really killed a bear. With a limited quantity of bearskins accessible, the market must eventually deteriorate. However, the initial written use originated from the 1891 Oxford English Dictionary which described a downturn in the market.

The stock market is seen as a bear market when it has a collective decrease in worth and value over a period of time, leading to a great decline in prizes and accompanied by rough instability, and a downward slope; thereby creating on investors, doubt and lack of confidence about the market. This doubt and uncertainty, further creates an atmosphere of anxiety and leading sell offs.

In the atmosphere of anxiety and doubt, leading to further sell off, a bear market usually has a 20% loss or more of its entire market worth for at least two months. The bear market has great effects on the economy. Apart from the instability in the stock market, value for product and services are greatly affected. Individuals bank account loses worth and value, there is usually a credit freeze which limits business progress and causes dismissal and increased unemployment; leading to lack of funds within the market and affecting sellers of product and services thereby causing additional joblessness and businesses shutting down.