Bear Market

A bear market is officially defined as a drop of 20% or more in a broad market index such as the S&P 500 from its most recent peak. Bear markets can last anywhere from a few weeks to several years and are often associated with economic recessions, rising unemployment, and declining corporate profits.

Historically, bear markets have occurred roughly every three to five years in the U.S. stock market. The average bear market lasts about 9.6 months, compared to the average bull market duration of 2.7 years. Notable bear markets include the 2008 financial crisis, the dot-com bust of 2000 to 2002, and the brief but severe COVID-19 crash of early 2020.

While bear markets can be frightening for investors, they also present buying opportunities for those with long time horizons. Dollar-cost averaging during a bear market allows investors to accumulate shares at lower prices, potentially boosting long-term returns. The key is maintaining a diversified portfolio aligned with your risk tolerance and resisting the urge to sell in a panic.