What is a bear market and when did the stock market experience the last one?

It has been a few years since fears of a bear market spread among investors. Some concerns arose in 2023, but markets rebounded and continued to climb in 2024, particularly after Donald Trump was elected as US President. However, much of that growth has been erased, with the Dow Jones Industrial Average, Nasdaq Composite, and S&P 500 all showing lower prices today than this time last year.

These conditions have been triggered by President Trump’s tariff announcement, which has disrupted markets worldwide. As growth expectations shrink, and consumer confidence hits some of the lowest levels record, investors are panicked. Both the S&P 500 and the tech-heavy Nasdaq Composite are now in bear territory, having dropped more than 20% since their recent highs earlier this year.

But what do bear and bull markets signify?

What is a bear market?

Two common terms used by Wall Street are bull and bear markets to talk about indices like the S&P 500, the Dow Jones Industrial Average, and the Nasdaq Composite rising or falling respectively. A bear market occurs when a market has dropped 20 percent or more from a recent high for a sustained period of time.

According to the Merriam Webster dictionary, the term bear market came first, based on a proverb that cautions against selling “the bear’s skin before one has caught the bear.” The original expression “to sell or buy the bearskin” was quickly shortened to “bear” to talk about a speculator selling stock or the stock itself being sold by a speculator.

Others say that it refers to the way a bear attacks, slashing downward with its claws. A bull on the other hand attacks by charging forward.

Sam Stovall, chief investment strategist at CFRA says that the term “bear” is a reference to the fact that bears retreat to their dens to hibernate, representing the market retreating from its gains.

How many bear markets have there been?

The last time all three indexes were in bear market territory was in March 2020 when covid-19 lockdowns slammed the breaks on the global economy. It was also the shortest bear market on record as the federal government injected trillions of dollars into the economy to stave off complete collapse. Bad market conditions in 2022 also led to some markets being under bear conditions.

Prior to that bear market, the US economy had enjoyed an unprecedented bull market fueled by massive injections of liquidity and interest rates near zero in response to the Great Recession. The bear market associated with the bursting of the housing bubble in 2007, lasted for 17 months.

Since 1928 there have been 25 bear markets according to Investopedia. The deepest and longest began in 1929 and lasted until 1932, it was followed by the Great Depression.

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