A bear market is a perceived trend of financial markets that to a degree goes against the prevailing economic environment. These trends are generally classified as secular, primary, and secondary over longer timeframes, and as cyclical or secular, short term.
The secular bear market generally lasts for several years. This type of bear market is characterized by a sustained decline in stock prices for at least five consecutive weeks. In most cases, this type of bear market is due to a fundamental change in the economy and/or business environment. Examples of fundamental changes could be a contraction in economic activity (fall in the number of businesses and/or firms), a change in government policies, a change in interest rates, or a significant political event.
On the other hand, a primary bear market typically occurs during a recession, which is the opposite of a secular bear market in that a secular bear market is normally characterized by a period of sustained growth in the economic environment. The first few quarters of the recessionary period typically have stronger gains in the economy than the subsequent quarters of the same period. A primary bear market usually fades over a few months, but if not, will last for some time until recovery begins.
During a primary bear market, the fall in stock prices is often temporary in nature. This means that the market should recover and once it does, will resume its previous level. The main problem in a primary bear market is that there is very little potential for future growth. However, the potential for recovery is greater during a primary bear market because it is characterized by a lower share price.
In a secondary bear market, the economy has weakened significantly and it is believed that the share price will continue to decline. While, in the primary bear market, there is no need to worry about being able to recover because it is just temporary. There is a higher risk of continued loss and the market may go further into the correction phase. In a secondary bear market, the fall in share prices is viewed as a signal of weakening business conditions and as a possible indication that future growth is not likely.
The short term bear market occurs for several weeks or even months before the recovery phase begins. In this type of bear market, the market has been defined by recent falling stock prices. However, this is generally not a long-term situation because it is typically the result of a temporary decline in the economic environment.
A short term bear market is often associated with a recession in one country or region, although the U.S. as a whole is considered a secular bear market because it has been experiencing a prolonged decline in the share price over recent years. It is the short-term bear market that has been identified as having the largest influence on global economic activity. As such, a weak economy in one country or region tends to cause a weakening effect on global stock prices.
In order to better understand the characteristics of bear markets, it is important to think about how the U.S. economy is influenced by external events. In addition to the above-mentioned, bear markets can be characterized by the relative strength and weakness of economies in a number of countries that are interconnected.
In a bear market, many people believe that global growth and development are both at risk. Because the bear market is characterized by high interest rates, the decline in share prices is not only viewed negatively in the United States but it is also viewed negatively internationally. The high costs of borrowing money from other countries are the main reason for this concern.
The U.S. economy, especially when in bear market, is considered to be an important factor because of the weakness of the U.S. economy. Many experts believe that the current financial state of the United States economy makes it more prone to experiencing a bear market than other nations.
Bear markets are extremely volatile and the factors that contribute to their stability can vary over time. As such, it is important to keep a close watch on developments in the United States, and globally. However, there is some evidence that suggests that it will remain stable for the foreseeable future.