A bear market means stocks have fallen 20% or more from their peak — and pessimism rules. Investors sell out of fear, companies cut spending, layoffs increase, and negative news dominates headlines. The term comes from how bears attack — swiping downward with their paws.
Major US bear markets: the Great Depression (1929-1932, -86%), dot-com bust (2000-2002, -49%), Great Recession (2007-2009, -57%), and COVID crash (2020, -34% in 23 days — the fastest in history). The average bear market lasts 9.6 months and drops 36%. The average bull market lasts 2.7 years and gains 114%.
The counterintuitive truth: bear markets are the best time to invest — stocks are on sale. An investor who bought at the bottom of every bear market since 1957 earned dramatically higher returns than one who avoided them. Warren Buffett's famous advice: "Be fearful when others are greedy, and greedy when others are fearful."