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1Fix the driver behind crashes, sound loss and screen glitches2Repair Windows errors before they cause bigger problems3Scan for outdated or missing drivers - takes under a minuteA bear market is a period of falling stock prices and pessimistic sentiment. A common benchmark is a decline of 20% or more in a broad market index, but the label is a convention—not a rule that every market participant applies identically. For you, the key issue is often whether you may need to sell investments while prices are down.
What is a bear market?
The SEC’s Investor.gov glossary defines a bear market as “a time when stock prices are declining and market sentiment is pessimistic.” It says that, generally, a broad market index falls by 20% or more over at least a two-month period. Investor.gov’s bear-market definition is a useful general guide, not a market law applied identically by everyone.
When a news report calls a market a bear market, check which index it means, where the decline is measured from, and what definition the report is using. The threshold is usually discussed in relation to a broad index; it does not mean every share, fund, or investor’s portfolio has fallen by the same amount.
How much does the market have to fall?
The frequently used threshold is a decline of 20% or more in a stock index. FINRA describes that as a common usage, while the SEC glossary adds that its general definition applies to a broad market index over at least two months. These are useful conventions for describing market conditions, but definitions and measurement choices can differ. FINRA’s stressed-markets terminology explains the common threshold.
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Outbyte PC Repair FREERepair Windows errors before they cause bigger problemsFix Now →Outbyte Driver Updater FREEScan for outdated or missing drivers - takes under a minuteDriver Scan →Bear market vs. correction
A correction is generally a decline of at least 10%; a bear market commonly refers to a decline of 20% or more. The terms describe different scales of market decline, not separate guarantees about what prices will do next.
| Term | Common threshold | What it describes |
|---|---|---|
| Correction | At least 10% decline, according to FINRA’s 2020 terminology | A reversal, usually a decline |
| Bear market | Often 20% or more; Investor.gov’s general definition specifies a broad index and at least two months | Falling stock prices accompanied by pessimistic sentiment |
Because the definitions are conventions, a specific account of a market episode should state the index and threshold being used rather than treating the label as universal.
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Does a bear market mean a recession?
No. A bear market describes stock-market prices and sentiment; a recession describes a contraction in the broader economy. Fidelity’s April 15, 2025 overview says most bear markets in its historical discussion coincided with recessions, but not all did. It also notes that bear markets have varied in length, from months to years. Its count of 26 bear markets over the past 150 years is Fidelity’s historical account, not a universal count; results can vary with the index and definition used. Fidelity’s bear-market and business-cycle overview provides that historical context.
Why a bear market can matter to your finances
A falling market matters personally when your investments are exposed to the decline and you need to turn them into cash. If you sell during a downturn to cover a job loss, medical care, education costs, or another need, you may have to sell at a lower price than you hoped. FINRA discusses this risk in its guidance on investment risk.
That is why the same market decline can have different consequences for different people. Someone who does not need to draw on investments soon may have more time to wait through market fluctuations than someone facing an imminent expense. The right investment choices depend on your financial situation, time horizon, and risk tolerance; the bear-market label alone cannot determine whether you should buy, hold, or sell.
Independent reader supportYour contribution helps us test, update, and keep practical guides available for everyone.What can you do with investments during a bear market?
There is no single action that is right for every investor. Rather than reacting only to a headline or percentage decline, consider how your portfolio and financial needs fit together.
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- Review when you may need the money. Consider whether upcoming expenses or an unexpected need could force you to sell investments during a decline.
- Check your mix of investments. Diversification and asset allocation can help manage some investment risks, but they cannot eliminate risk or prevent losses in a downturn.
- Do not assume a long holding period makes stocks safe. FINRA cautions that stocks remain risky even over long periods; time is not a guarantee against loss.
- Relate decisions to your circumstances. Your financial situation, time horizon, and tolerance for risk matter more than the market label by itself.
These are general considerations, not individualized investment advice or a prediction about when a market decline will end.
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