What is commonly accepted as a sign of a bear market?

The commonly accepted sign of a bear market is characterized by stock prices dropping by 20% or more from recent highs. A bear market generally reflects a prolonged period of negative investor sentiment, resulting in widespread pessimism about future performance. This significant decline in stock prices typically reflects downward trends in overall economic conditions, leading investors to expect further losses, which often perpetuates the downward spiral as they sell off their holdings.

A bear market can have broad implications for investors and the economy, signaling that many stocks and indices are experiencing significant downturns. Recognizing this threshold is essential for investors in making informed decisions about when to enter or exit the market, manage risk, or adjust investment strategies.

In contrast to other options, stock prices increasing significantly would indicate a bull market, decreased market volatility typically suggests stability rather than the fear and uncertainty associated with bear markets, and increased trading volumes can occur in any market condition, depending on various factors such as news events or investor sentiment. Thus, the distinguishing factor defining a bear market is largely anchored in the context of a 20% or more drop in stock prices.