Bear market investing strategies

A bear market is generally defined as a drop of 20% or more from market highs. The term can be used to describe a specific security or the market in general. When a certain stock drops 20% in a short time, for example, it can be said that the stock has entered a bear market.

A bear market during a general market downturn means that multiple broad market indexes such as the Standard & Poors 500 Index (S&P 500) or Dow Jones Industrial Average (DJIA) fall by 20% or more in two months or less.

Bear stock markets are usually associated with economic recessions, although this isn’t always the case. As economic activity dries up, people lose jobs, consumer spending falls and business earnings decline across the board. As a result, many companies see their share prices tumble.