What characterizes a "bear market"?

A bear market is characterized by declining prices, typically defined as a drop of 20% or more in a broad market index or individual asset prices from their recent highs. This downturn is often accompanied by negative investor sentiment, where market participants become pessimistic about future price movements, leading to lower confidence and increased selling pressure.

In a bear market, investors generally expect further losses, resulting in a self-perpetuating cycle of selling as sentiment deteriorates. This contrasts sharply with a bull market, where rising prices and positive sentiment prevail. Understanding the mood of the market is crucial, as investor confidence significantly influences trading behavior.