Facing a Bear Market? Here's What You Need to Know

Bear markets have been part of investing history for centuries—since 1709, to be exact, when the bear first became a symbol for market downturns. While they can stir up fear among investors, understanding them can help you stay grounded—and possibly even find opportunity in the chaos.

Let’s break down what are bear markets, why they happen, how often they show up, and what smart strategies (including a chat with your financial advisor) can help you weather them.

What Exactly Is a Bear Market?

A bear market typically refers to a period when major stock indexes—like the S&P 500—drop at least 20% from recent highs. It’s the opposite of a bull market, where prices rise 20% or more from their lows. A smaller dip of 10% is often called a “market correction,” but once that drop deepens, you’re in bear territory.

What Causes Bear Markets?

Bear markets usually happen when investor confidence takes a hit. That can be triggered by anything from economic uncertainty and inflation to global conflicts, elections, or even changing consumer habits. When enough people start selling out of fear or pessimism, prices tumble, and the selloff feeds on itself.

How Often Do Bear Markets Occur?

Historically, U.S. markets dip into bear territory roughly every six years. On average, stocks decline about 33% during these downturns—but they have always recovered in time. In fact, markets often bounce back strongly in the months after a bear market ends.

Past performance is no guarantee of future results. Source: Fidelity Investments:The S&P 500® Index is a market capitalization–weighted index of 500 common stocks chosen for market size, liquidity, and industry group representation. S&P and S&P 500 are registered service marks of Standard & Poor's Financial Services LLC. The CBOE Dow Jones Volatility Index is a key measure of market expectations of near-term volatility conveyed by S&P 500 stock index option prices. You cannot invest directly in an index.

Are Bear Markets the Same as Recessions?

Not necessarily. While they often overlap, a bear market doesn’t guarantee a recession is coming. In fact, about 25% of bear markets haven’t been followed by an economic recession. So, while both can feel like storm clouds on the horizon, they’re not always linked.

What Should You Do When the Market Turns Bearish?

Watching your portfolio dip can be nerve-wracking, but here’s how to respond strategically rather than emotionally:

Review Your Emergency Fund

In uncertain times, cash is king. Ideally, you should have 3 to 6 months of essential expenses set aside. If you have dependents or a fluctuating income, consider building a bigger cushion. If you're unsure how to start or build up that reserve, your financial advisor can help create a plan tailored to your budget.

Keep Your Timeline in Focus

Investing is a long game. While short-term drops are tough, remember your long-term goals. Bear markets can highlight whether your risk tolerance and portfolio are aligned with your comfort level—something worth reassessing with your financial advisor when things stabilize.

Stick to Your Strategy

It's tempting to stop contributing to your accounts during a downturn—but that can be a costly mistake. If you’re investing regularly (like through a 401(k) or IRA), you’re likely using dollar-cost averaging, which lets you buy more shares when prices are low. That could pay off later when the market recovers.

Look for Opportunity

If your financial situation is solid and you’re prepared for some volatility, a bear market might be a smart time to invest more. You could also rebalance your portfolio to lean more toward stocks. Just remember—timing the market is nearly impossible. A good rule of thumb: stay focused on your long-term goals and talk to your financial advisor before making major moves.

Final Thoughts

Bear markets may be unsettling, but they’re not unusual—and they don’t have to derail your financial plan. With the right strategy and support from a trusted financial advisor, you can navigate the downturn and potentially stay on track for the future you’re building.

Sources:

https://www.fidelity.com/learning-center/smart-money/bear-market

All information contained herein is derived from sources deemed to be reliable but cannot be guaranteed. All views/opinions expressed in this newsletter are solely those of the author and do not reflect the views/opinions held by Advisory Services Network, LLC.

Rebalancing investing involves risk including loss of principal.  No investment strategy, such as rebalancing, can guarantee a profit or protect against loss.  Rebalancing investments may cause investors to incur transaction costs and, when rebalancing a non-retirement account, taxable events will be created that may increase your tax liability.