A bear market is a sustained decline in asset prices, generally defined as a drop of 20% or more from a recent high, typically accompanied by widespread pessimism about future performance. It's the counterpart to a bull market.
Understanding bear markets matters because they're a normal, recurring part of investing history, not an anomaly, and reacting to them with panic selling is one of the most common ways investors lock in losses that a diversified, long-term plan is designed to ride out.
How a bear market is defined and measured
The 20% decline threshold is measured from a recent closing high to a subsequent low, usually tracked with a broad index such as the S&P 500. A decline of 10-20% is instead usually called a 'correction,' a related but less severe term.
For instance, if the S&P 500 peaks at 5,000 and later closes at 4,000 or below, that 20% drop would typically be labeled the start of a bear market.
How long do bear markets last?
Historically, U.S. bear markets have lasted anywhere from a few months to around two years, with an average duration cited around 9 to 15 months depending on the study, and average declines historically in the 30-35% range.
By comparison, bull markets have historically lasted considerably longer on average, which is one reason long-term index investors are often encouraged to think in years or decades rather than reacting to any single downturn.
What to do during a bear market
Common, generally discussed approaches include avoiding panic selling at a loss, maintaining an emergency fund so you aren't forced to sell investments to cover expenses, and continuing regular contributions (dollar-cost averaging) if your goals and time horizon haven't changed.
Reviewing diversification across asset classes is also commonly discussed, since different assets don't always decline by the same amount or at the same time during a downturn.
Historical depth and length of major bear markets
Some of the most significant U.S. bear markets include the 1929-1932 decline of roughly 86% during the Great Depression, the 1973-1974 bear market of roughly 48%, the dot-com bear market of 2000-2002 which saw the S&P 500 fall about 49% (with the Nasdaq falling much further, around 78%), and the 2007-2009 financial-crisis bear market of about 57%. More recently, 2020 saw a roughly 34% decline that lasted only about a month before recovering, and 2022 saw a decline of roughly 25% over most of the year.
These examples show wide variation in both depth and duration — from a rapid, monthlong drop in 2020 to a multiyear grind lower in the early 1930s and early 2000s — which is why generalized averages should be treated as rough historical patterns rather than a forecast for any specific future downturn.
What investors typically get wrong during a bear market
One common mistake is selling near the bottom out of fear, then waiting for things to feel 'safe' again before buying back in — often after much of the recovery has already happened, since some of the market's strongest days historically have occurred shortly after its worst days. Missing even a handful of the best trading days over a multi-decade period has, in various studies, been shown to meaningfully reduce long-term returns compared with staying invested throughout.
Another common error is treating a bear market as confirmation that a long-term strategy has failed, leading to abandoning diversification or stopping contributions altogether, rather than recognizing downturns as a recurring, if uncomfortable, part of investing history. A third is overconcentrating in cash or 'safe' assets for too long after a downturn out of lingering caution, which can mean missing a substantial portion of the eventual recovery.
Common mistakes
- Selling investments at a loss out of panic during a downturn, which locks in losses that might otherwise have recovered over time.
- Assuming every 10% drop is a bear market — that's technically a correction unless the decline reaches 20%.
- Believing bear markets can be reliably predicted or timed in advance.
- Stopping contributions entirely during a downturn rather than sticking with a planned, consistent investing schedule.
- Waiting too long after a downturn to reinvest cash, missing a large portion of the eventual recovery.
Study past downturns and recovery patterns using Aurora's money basics lessons.
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Open Decision Lab →Frequently asked questions
How often do bear markets happen?
Historically, U.S. bear markets have occurred roughly every few years on average, though the exact spacing varies considerably and there's no fixed schedule.
Is a bear market the same as a recession?
No — a bear market refers to asset price declines, while a recession is a broader economic contraction typically measured by factors like GDP and employment; the two often overlap but aren't the same thing and don't always happen together.
What's the difference between a bear market and a correction?
A correction is a decline of 10-20% from a recent high, while a bear market refers specifically to a decline of 20% or more.
Do bear markets affect all investments equally?
No, different asset classes and sectors typically decline by different amounts during a bear market, which is part of why diversification is often discussed as a way to manage risk.
What typically happens after a bear market ends?
Bear markets have historically been followed by bull markets, though the timing and strength of any recovery is not guaranteed and varies by period.