Appease Wealth Solutions

What is a bear market and should I be worried when it happens?

  For those properly prepared, the bear market is not only a calamity but an opportunity.

John Templeton



In the most simple terms, a bear market can be defined as a 20% (or more) fall in the recent stock prices. The term is generally used to indicate the performance of a company in the  S&P 500. For a market to be declared bearish, fall of 20% in recent highs prevailing over a period of 60 days or more should be recorded. A bear market is a situation under which some prolonged price declines are Prevailing, Encouraging the  investors to continuously sell and lower the prices. Due to a decline in the prices of stocks, investing during such times can be a risky venture. In such a scenario, investors would rather opt for holding back their or investing at a better place. A bear market is always looked upon from a negative perspective by the investors, who generally fear a further fall in the prices, thereby adding to the falling rate.  A bear market can be cyclical (short-term) or secular (long-term),  lasting from about several week to several years respectively.

A bear market is often accompanied by recession which is a condition of falling country’s GDP due to low aggregate demand and falling prices. Such a situation can be marked by increasing unemployment rates.

There are many causes of a bear market. Unexpected fluctuations in the socio-economic spheres of a country can adversely het the stock market and therefore, the investors’ decisions. Worldwide pandemics such as COVID-19 have been observed to be a major cause of bear markets. A stagnant or slow economy, increase in inflation and unemployment rates, a global recession, global mindset, are some of the common determinants of bear market.

Now the point comes that should one be worried about a bear market? A bear market generally throws a negative outlook. The reason being that most people don’t know when a bear market can happen, and what can be the potential outcomes of it. But it is important to note that bear markets are natural to occur. It is a part of the stock market cycle. Bear markets are mostly seen as a calamity until the realization that it can serve as a big opportunity. A bear market can really yield an opportunity to build a strong groundwork for your business. Here are some tips to make your business shine during a bear market-





While stuck in a bear market, you need to learn the art of recognizing good stocks and bad stocks. A bear market offers both. A basic prophecy about stock markets says that companies with a good hold on their stock tend to pull themselves out from such crisis rather than declining even further. A good research of the stock market can yield some diamonds in the rough. A good company in bear market is nothing less than some good stuff on sale. You can invest in some great stocks at bargained prices and keep them as your assets for the future.


The bond credit ratings are supposed to indicate the credit worthiness of a firm. A bear market clearly brings to front the debt status of a company. It shows which company company is dealing well with their debts and which is trapped in distress. Investors can use the information published by the credit agencies to examine the company’s affairs and can thereby invest in creditworthy company. A company in a situation of bear market and still holding an “ investment-grade” is a great option to invest in.


In a rotating sector method, companies tend to make a shift in their investment assets from one sector to another. History has revealed that during the times of economic crisis, there are some sectors that can perform well. It is important to note which particular sector can perform well during a bear market and the companies can shift their resources towards manufacturing those commodities. We all know that even if the disposable income comes to zero, there is still some autonomous expenditure which cannot be ignored such as consumer staples, medications, etc. Such commodities comes under defensive industries, generating defensive opportunities. Defensive opportunities have been able to yield great performance, especially during unstable market economies.

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