Which condition characterizes a bear market?

A bear market is characterized by a decline in investment prices, specifically a drop of 20% or more from recent highs. This condition signals pessimism among investors, leading to a general loss of confidence in the market. During such periods, negative economic indicators or decreased corporate earnings can also contribute to the downward trend, as investors anticipate further declines and may sell off assets to prevent bigger losses.

In contrast, rising prices of investments would define a bull market, where optimism drives prices higher. Stable pricing with minimal fluctuations suggests a market in equilibrium, which does not fit the definition of a bear market. Increased consumer confidence usually correlates with rising market prices, fostering a favorable investment environment rather than the declining prices associated with a bear market. Thus, the defining characteristic of a bear market remains the significant drop in investment prices by 20% or more.