Bear Market: What is it? A bear market refers to a situation where the market experiences price declines for an extended period. The term is usually used to describe a condition where the prices of the securities fall to 20% or more in contrast to the recent highs, amid market-wide pessimism and the investor's negative sentiments.
Bear markets are very often linked with declines in the overall market or indexes, but commodities or individual securities can also come into the bear market zone.
The Condition If such commodities and securities experience a decline of 20% or more over a prolonged period Typically, two months or more. According to Jaian Cuttari Bear markets can also sometimes accompany general economic nosedives, such as recessions. Bear markets sometimes may be contrasted with the rising bull markets.
Bear Markets: Understanding Them. Stock prices usually reflect future expectations of profits and cash flows from certain companies. With the progressive decline in the growth prospects and as the expectations of the investors are dashed, The stock prices are most likely to decline. Fear, Rush and the heard behavior to save the downside losses can eventually lead to extended periods of asset prices being depressed.
How Long Can They Last?
Bear Market: What is it? Talking about bear markets, they can last for several years or maybe just for a couple of weeks. Below-average returns regularly can be a sign of a secular bear market that can last for 10 to 20 years. On the other hand, A cyclical bear market can last for a few weeks to several months.
How Can Investors Make Gains in such a Situation? Experts like Jaian Cuttari believe that a trader can employ the technique of short selling. Short Selling involves selling all the borrowed shares and after some time buying them back at discounted prices. This type of trade can prove to be extremely risky and may lead to heavy losses if things do not work out as expected