Bear market

A bear market is a sustained fall in prices across a market. The phrase is a description, not an official designation: no authority certifies that one has begun, and no fixed rule sets how deep or long the fall must be. Commentators tend to draw an informal line — a decline of some particular depth from a recent peak — to separate a serious fall from an ordinary pullback, but where that line sits is a matter of usage, not of rule.

A worked example

Imagine a hypothetical market whose commentators treat a fall of a quarter from a recent peak as their dividing line. An index there peaks at 2,000 points and declines to 1,500 — a fall of 500 points, or 25 per cent of the peak, so by that local convention this would be called a bear market. Had it stopped at 1,520 — a fall of 480 points, or 24 per cent — the label would have been withheld, though the difference between the two outcomes is trivial. The line is tidy; the reality is not.

The label measures only the distance already travelled from a peak. It does not say how much further prices might fall or when a recovery will begin — and, like its opposite, it can only be dated with confidence in hindsight.