What is a bear market?

A bear market refers to a condition in the financial markets where prices are experiencing a sustained decline, typically defined as a drop of 20% or more from recent highs. This type of market atmosphere is generally characterized by widespread pessimism and negative investor sentiment, which can be fueled by various factors such as economic downturns, poor corporate earnings, or geopolitical issues.

In this context, the notion of falling prices signifies a lack of confidence among investors, leading them to sell off assets in anticipation of further declines. As a result, bear markets often create a challenging environment for both investors and companies, as funding can dry up and consumer spending may decline. Understanding the implications of a bear market is crucial for investors, as it influences their strategy, risk tolerance, and potential opportunities for buying undervalued assets.

The other options depict scenarios that do not accurately capture the characteristics of a bear market. Rising prices indicate a bull market, stable prices refer to a neutral or sideways market condition, and a market driven by speculation can occur in various conditions, not specifically tied to falling prices.