Bear market
In short
#MacroA bear market is a decline of 20% or more from a recent high, sustained over time. A drop of 10% to 20% is called a correction rather than a bear market.
Why it matters
The 20% line separates two very different narratives in commentary. Corrections get described as healthy; bear markets get described as regime changes. The underlying price action is continuous, but the label flips at an arbitrary threshold and changes the tone of everything written about it.
Example
An index peaks at 5,000 and falls to 4,400, a 12% correction. It keeps sliding to 3,950, crossing the 21% mark, and the same decline is now reported as a bear market without anything new having happened.
Frequently asked
What is the difference between a correction and a bear market?
Depth. A fall of 10% to 20% from the high is a correction; 20% or more is a bear market. Both are conventions rather than formal definitions, and neither says anything about what comes next.
Does a bear market mean a recession is coming?
Not reliably. Equity markets have fallen 20% without a recession following, and recessions have arrived without a preceding bear market. They correlate loosely, which is much weaker than commentary usually implies.