Context: The S&P 500 —- a stock market index that tracks the performance of 500 of the largest publicly traded companies in the US — on Monday briefly entered bear market territory for the first time since 2022.

Decoding the context: A bear market (or for that matter, all types of market decline) takes place when investors are more motivated to sell than to buy stocks.

Learn More:

• A bear market refers to a condition in which a stock index declines by at least 20% from its most recent peak value. This designation lacks an official or standardized determination and serves primarily as an informal term to succinctly indicate a significant downturn in the stock index.
• A bear market is the opposite of a bull market, which refers to when a stock index has increased at least 20% from its recent low. Note that a bear market is different from a market correction which occurs when there is a decline of at least 10% or more.

Why does a bear market occur?

• There could be a host of different reasons. These include a weak economy, the anticipation of an economic slowdown, or investor sentiment that the market is too hot and prices too high. Events that are not purely economic — such as wars, oil supply shocks, etc — can also spook investors, leading to a dip in the market.
• A bear market often precedes a recession — a slowdown in economic output and is usually defined as at least two consecutive quarters of decline in gross domestic product (GDP). However, this is not always the case.
• The Indian stock market has also experienced bear markets over the years. One of the worst bear markets occurred during the 2008 global financial crisis. Between September 8, 2008, and November 6, 2008, the Nifty 50 index had dropped over 35%.

Source : Indian Express