WHAT IS BEAR SEASON?

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Bear season, or bear market, is when the market experiences prolonged price drops. It is often used to refer to situations where security prices have dropped 20% or more from recent highs due to widespread pessimism and negative investor sentiment.

Bear seasons are often associated with dips in an overall market or index, such as the S&P 500; however, individual securities may be considered acceptable during a bear season if they are down 20% or more over an extended period of time.

Although there is no general opinion about how long the bear season will last, it is expected that prices will continue to decrease for a long time. Demand for products in a bear market is decreasing.

Since the demand has decreased, nobody wants to buy those products and the prices continue to fall.

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The causes of a bear market often vary, but in general, a weak, slowing or stagnant economy will bring with it a bear market. Signs of a weak or slowing economy are often hidden in low employment, low disposable income, weak productivity and business profits.

Also, any government intervention in the economy can trigger a bear market. For example, changes in the tax rate or interest rates can lead to a bear market. Similarly, a drop in investor confidence could signal the beginning of a bear market. Investors will act when they believe something will happen; in which case they sell shares to avoid losses.

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