In some cultures, bears symbolize courage, strength, and wisdom. Investors have a different view. To investors, bears mean falling stock prices and anemic portfolio values.

A bear market occurs when stock prices, according to a benchmark index, fall 20% or more. The S&P 500, the Dow Jones Industrial Average, and the Nasdaq Composite Index are popular benchmarks representing different segments of the U.S. stock market.

All three indexes dipped in the wake of new tariff policies announced on April 2 by President Trump. After stock prices declined, experts began warning of a new bear market in the U.S. Let's explore what this warning means, whether we're in a bear market, and what actions you can take to protect your wealth.

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What is a bear market?

A bear market is a prolonged reduction in stock prices of 20% or more from a recent high point. While some investors may view bear markets as the enemy of long-term returns, periods of weaker stock prices are normal and necessary. Without bear markets, investing risk would be limited. And without risk, investors would pay more for stock, limiting potential returns.

Bear market frequency, duration, and severity

The table below outlines key bear market characteristics, including how often they happen, how long they last, and how severe they are, according to Goldman Sachs research.

Bear market vs. bull market

Bear markets are temporary detours from bull markets, or periods when stock prices are rising. A 20% gain from a recent low point is an accepted bull-market threshold. Bull markets last longer than bear markets and more than offset bear-market losses. This is evident in the stock market's long-term returns. Over time, stock prices grow an average of 6.5% to 7% annually, net of inflation, despite periodic bear markets.

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Bear market vs. market correction

A market correction is a decline in stock prices of less than 20% from a recent high. While there's no firm threshold, many investors begin talking about corrections when stock prices have fallen 10%. As with bear markets, these price movements are usually measured by changes in a major benchmark index like the S&P 500.

Are we in a bear market now?

The S&P 500 hit a high of 6,147.43 on February 19, 2025. A 20% decline from that point would be 4,917.88. The index did fall as low as 4,910.42 on April 8. On April 9, President Trump paused most of the new tariffs, and stock prices rose.

In this case, the S&P 500 fell 20% and quickly rebounded. That does not constitute a bear market. However, the index's closing level of about 5,375 on April 23 remains more than 10% below its February high — which does meet the market correction threshold.

Learn more: Panic of 1907: The stock market crash that brought us the Fed

Investing in bear markets

Market corrections and bear markets happen when more investors are selling vs. buying. This trend is often prompted by uncertainty about future business conditions. Changing tariff rules and a rising conflict with China are two factors that sent investors looking for more safe-haven investments.

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Selling stocks before a bear market or correction begins can be a good strategy. If you sell while prices are still high, you get maximum value. You can then redeploy the funds temporarily in safer assets.

The challenge is that most investors cannot accurately predict the timing of stock market cycles. A mistimed trade can result in unnecessary losses or missed opportunities for gains.

Simplest bear market strategy

You can avoid mistimed trades by following the simplest bear market investing strategy, which involves making no changes to your plan. Keep contributing to your 401(k) and brokerage account, hold on to your stocks and funds, and wait for the bear market to end.

Learn more: How much should I contribute to my 401(k)?

Maintaining the status quo on your investing activities during a bear market provides these advantages:

Your dollar buys more when stock prices are down. You can add to your share count faster in bear markets, which positions you nicely for gains in the future.
You avoid realizing losses at temporarily low prices. A stock can fall from $100 to $75 and then quickly rise to $110. You don't want to sell at $75.
You remain invested and able to benefit from recovery gains. Gains near the end of a bear market can be extreme. Staying invested is the only way to participate.
You don't have to make decisions. Bear markets are stressful. You might be anxious about doing something — anything — to stem your losses. Permitting yourself to do nothing can alleviate that worry.

Keep calm and invest on

Bear markets happen, and a 20% or more decline in stock prices has a chilling effect on your net worth. The good news is, these cycles are temporary. And that gives you the option to ignore the headlines, stay calm, and continue investing to move toward your long-term financial goals.

Tim Manni edited this article.