What is a Bear Market?

What is a Bear Market?

24/08/2020 by Koinal
A bear market is a period when stocks and securities fall in value. Usually, this situation comes with an overall decline in the economy. Some experts define this event as a 20 percent decline in prices over two months. The drop can appear in the leading stock market indexes like the Dow Jones Industrial Average (the DJIA) and the Standard & Poor’s 500 ( the S&P 500).
What is a Bear Market

The deep and lingering decline can create low levels of investor optimism. The widespread fear of further falls and pessimism are essential parts of this type of market. The lack of investor optimism tends to reduce the amount and volume of advances and gains.

A bull market is a period of rising value that generally occurs with the right economic conditions. Rising costs can raise the profitability of stocks, and investors usually maintain a favorable opinion of future growth. In rising or falling markets, Koinal provides a simple method for using bank credit cards and debit cards to purchase Bitcoin and other leading cryptocurrencies.

What Causes the Decline?

The long decline in stock and other investment prices can have many causes. Many things can cause investors to change their buying and selling patterns. Causes of market downturns include the below-listed situations. 

  • News and events 
  • Overall economic decline 
  •  Financial crises here or abroad 
  •  Loss of investor confidence

A Historical View

The Great Depression was the most famous example of a falling market in weak economic conditions. Following the stock market crash of October 29,1929, the nation experienced a severe market downturn. Thousands of investors lost their holdings, as many stocks lost all value. The United States suffered a severe loss of economic activity, and millions of residents lost their jobs, homes, and businesses.

In 2008, the Great Recession caused a severe downturn that was later broken by an 11-year bullish period. The COVID 19 pandemic broke the long positive run in the spring of 2020. 

Disadvantages of Bearish Markets

Falling markets can reduce the value of stocks and other investments. The falling markets often reduce the number of buyers at favorable prices, and sellers can find it difficult to sell. The uncertainty of the marketplace increases when investors are pessimistic and fearful.

Investors prefer an ideal situation in which investments grow and in a predictable, steady way. Declines can be sudden or unexpected, and these changes interfere with investor plans and goals. Today cryptocurrency offers an alternative to traditional investments. Koinal offers a smooth purchasing experience with bank cards that work well for nearly all levels of investment.

Advantages of a Downturn

The essence of a bear or downward trend is that stocks and other assets lose market value. For many stocks, the underlying elements are unchanged. For example, an automaker stock may fall in a bear market, but it could have deep assets and excellent long-term prospects. In this case, the stock’s falling price could be an opportunity to get excellent value at a low price.

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