Bearish

Bearish In finance, the term bearish refers to a market sentiment or outlook that anticipates a decline in the price of securities, such as stocks, bonds, commodities, or currencies. A bearish investor, often called a "bear," believes that the market or a particular security will decrease in value and may take actions such as selling off assets or engaging in short selling to profit from the anticipated decline.

Characteristics of a Bearish Market

A bearish market is characterized by:

• A general decline in stock market indices such as the Dow Jones Industrial Average, S&P 500, or NASDAQ Composite.
• Decreasing investor confidence and increased market volatility.
• Higher levels of short selling and put option trading.
• Negative economic indicators, such as rising unemployment, declining GDP, and lower corporate earnings.

Causes of Bearish Sentiment

Several factors can contribute to a bearish sentiment, including:

• Economic recession or downturn.
• Negative corporate earnings reports.
• Geopolitical instability or conflict.
• Changes in monetary policy by central banks, such as raising interest rates.
• Natural disasters or pandemics that disrupt economic activity.

Bearish Strategies

Investors who anticipate a bearish market may employ various strategies to protect their investments or profit from the decline:

• Short selling: Borrowing shares to sell at the current price with the intention of buying them back at a lower price.
• Buying put options: Contracts that give the holder the right to sell a security at a specified price within a certain timeframe.
• Investing in inverse ETFs: Exchange-traded funds designed to move in the opposite direction of a specific index or sector.

Historical Bear Markets

Some notable bear markets in history include:

• The Great Depression (1929-1939)
• The Dot-com bubble burst (2000-2002)
• The Global Financial Crisis (2007-2009)
• The COVID-19 pandemic market crash (2020)

Related Concepts

• Bullish: The opposite of bearish, indicating a market sentiment that anticipates rising prices.
• Market correction: A short-term decline in the market, typically defined as a drop of 10% or more from recent highs.
• Recession: A significant decline in economic activity across the economy, lasting more than a few months.

See Also

• Stock market
• Short selling
• Put option
• Economic recession
• Market volatility
• Bullish