Glossary
Bear Market
A bear market is a period in which a broad stock market index falls 20% or more from its recent high.
The 20% threshold is a convention, not a law of nature, but it usefully separates ordinary pullbacks from deep declines. Bear markets have historically arrived roughly every several years, varied widely in length, and — so far — have always eventually been followed by recoveries to new highs, though past patterns do not guarantee future ones.
Why it matters in practice
The financial damage in bear markets often comes less from the decline itself than from selling during it, which converts a temporary paper loss into a permanent one. An allocation set in advance to match real risk tolerance is the standard defense; for retirees drawing income, sequence-of-returns risk makes the early-retirement bear market a specific planning problem.
Related terms: Bull Market · Volatility · Drawdown · Sequence-of-Returns Risk · Risk Tolerance