A bear market is when a stock index falls 20% or more from its most recent peak, measured on closing prices. It is the standard line used by analysts and data providers to mark a deep, sustained downturn, as opposed to a correction, which is a 10% to 20% dip. Bear markets are normal: the S&P 500 has had 27 of them since 1928, roughly one every 3.5 years, and Singapore's Straits Times Index has gone through several, including a fall of about 35% during the 2020 Covid crash. They are also temporary. The average S&P 500 bear market has lasted about 9.6 months and fallen around 35%, while the bull markets that follow have averaged 2.7 years and a 112% gain. For a young investor with decades ahead, a bear market is mostly a question of how you behave while it runs, not whether your portfolio survives it.
A stock index officially enters a bear market when its closing price drops at least 20% below its most recent high. The clock is usually backdated to that prior peak, and the bear market is considered over once the index sets a new all-time high. The lowest point in between is the trough.
The 20% figure is a convention, not a law of finance. It became the shorthand on Wall Street decades ago and stuck because it is a clean, round number that separates an ordinary wobble from something deeper. Nobody rings a bell at exactly minus 20%, and markets do not behave differently at minus 19.9% versus minus 20.1%. Treat it as a label for severity rather than a trigger to act.
The terms come from how each animal attacks. A bear swipes its paws downward, so a falling market is a bear market. A bull thrusts its horns upward, so a rising market is a bull market. The same 20% threshold defines both: a 20% rise from a low marks the start of a new bull run.
These four words get mixed up constantly, and they describe different things. Three are about prices; one is about the wider economy.
A correction is a 10% to 20% drop. These happen often, sometimes more than once a year, and most never reach bear territory. A crash is not defined by a fixed percentage at all. It describes a sudden, violent fall over days rather than months, like the single-day drops in 1987 or the speed of the March 2020 selloff. A crash can tip an index into a bear market, but a slow grind lower can do the same thing without any dramatic single day.
A recession is different again. It is a broad decline in economic activity, traditionally measured by output, jobs and spending rather than share prices. Markets and the economy are linked but not the same. Since 1928 the US has had 27 bear markets but only around 15 recessions, so stocks can fall hard without a recession, and they often start recovering before the economy does.
| Term | What it measures | Rough threshold | How long it usually runs |
|---|---|---|---|
| Correction | Index price | Down 10% to 20% from a peak | Weeks to a few months |
| Bear market | Index price | Down 20% or more from a peak | Months, sometimes longer |
| Crash | Index price | No fixed number; a sudden steep fall | Days to weeks |
| Recession | The economy (output, jobs) | Broad, sustained decline | Several months to over a year |
Bear markets feel rare when you are in a long bull run and inevitable when you are in one. The history settles the argument. Using the S&P 500 as the most-studied benchmark, there have been 27 bear markets since 1928, against 28 bull markets, so the two roughly take turns.
The numbers below are averages, which means real bear markets vary a lot around them. The 2020 Covid bear lasted about a month from peak to trough; the 2000 to 2002 dot-com bust dragged on for more than two years. What stays consistent is the asymmetry: down moves are shorter and sharper, recoveries are longer and larger, and over time the up years dominate. Across roughly 95 years of S&P 500 history, bear markets account for only about 21 of those years.
| Measure | Bear market | Bull market |
|---|---|---|
| Number since 1928 | 27 | 28 |
| Average length | About 9.6 months (289 days) | About 2.7 years (988 days) |
| Average move | Down about 35% | Up about 112% |
| Frequency | Roughly once every 3.5 years | Most of the time in between |
Analysts sometimes sort bear markets by how long they run, because a one-month plunge and a two-year grind ask very different things of an investor. The labels are loose and overlap, but they are a useful way to set expectations when you are inside one.
A short, sharp bear can be over before you have finished worrying about it. The Covid drop in early 2020 went from peak to trough in about a month. A drawn-out one is the harder test: the dot-com bust took the S&P 500 more than two years to bottom, and prices kept making new lows the whole way down. Knowing which kind you might be in does not change the plan, but it does change how long you need the discipline to last.
There is also a difference between a cyclical bear, tied to the normal boom-and-bust of the economy, and a structural one caused by a popped bubble or a broken part of the financial system. The 2008 crisis was structural, which is part of why it cut so deep and why the recession around it ran long.
| Type | Typical length | Example |
|---|---|---|
| Short-term | Weeks to a few months | 2020 Covid crash |
| Intermediate | A few months to about a year | Many post-war US bears |
| Long or secular | One year to several years | 2000 to 2002 dot-com bust |
Nobody can predict the exact start of a bear market, and anyone who claims they can is guessing. There are, though, a few well-known warning signs that professionals watch. None is a reliable trigger to sell, and acting on them alone is a good way to miss out on gains, so treat them as context rather than a signal.
An inverted yield curve, where short-term government bonds pay more than long-term ones, has come before several US recessions and is the most-cited warning sign. Narrowing market breadth is another: when an index keeps rising but fewer and fewer stocks are doing the work, the rally is thin and more fragile. Stretched valuations, where prices sit far above company earnings, leave less room for disappointment. Rising interest rates, slowing growth and a darkening mood among consumers and businesses round out the usual list.
The honest takeaway is that these signals fire early, fire often, and sometimes do not lead anywhere. The yield curve has inverted without a bear market following, and bull markets have run for years while pundits warned of a top. This is exactly why a plan built on dollar-cost averaging and a long horizon beats one built on forecasts.
Most bear-market data uses US indices because the records go back furthest, but the pattern shows up at home too. The Straits Times Index has gone through several deep drawdowns, and the recoveries have followed the same shape.
In the 2008 Global Financial Crisis the STI fell roughly 60% from its October 2007 peak near 3,900 to its March 2009 trough near 1,460, one of its worst on record. During the 2020 Covid crash it dropped about 35% in a matter of weeks, from an early-2020 high near 3,400 points to a low around 2,210 in late March 2020. Both felt terrifying in the moment. Both recovered. The STI went on to cross 4,000 points for the first time in 2025 and broke past 5,000 for the first time in February 2026, helped by the heavy weighting of the three local banks, DBS, OCBC and UOB, which together make up close to half the index.
The lesson from STI history is the same as the global one. An index made of real companies that keep earning money tends to claw back its losses and then make new highs, but the timeline is unpredictable and the drop can be brutal while it lasts. If you want exposure to that index without picking individual stocks, an STI exchange-traded fund is the usual route; the Singapore REIT and ETF guide covers how these work.
There is no single trigger. Bear markets tend to come from one or more of a few familiar pressures building until investors reprice everything at once.
The common drivers are a slowing economy or fear of a recession, sharply higher interest rates that make borrowing costlier and bonds more attractive than shares, an external shock such as a pandemic or war, or the bursting of a bubble after prices ran far ahead of company earnings. Each of the big modern bears maps onto these: 2000 was a tech bubble, 2008 was a credit and housing collapse, 2020 was a pandemic shock, and 2022 was driven by inflation and rapid rate hikes.
For a Singapore-based investor, much of this is imported. Singapore is a small, open market, so US Federal Reserve decisions, global growth and China's economy move local prices more than anything domestic. That is also why diversifying across regions, rather than holding only STI names, smooths the ride. The diversification idea is simply not having all your money depend on one country or one company.
The hard part of a bear market is behaviour, not strategy. The strategy is well understood; sticking to it while your portfolio is down 30% is the challenge. A few principles do most of the work.
First, only invest money you will not need for years. The classic mistake is being forced to sell at the bottom because rent or an emergency comes due. Keep an emergency fund of three to six months of expenses in cash or near-cash so your investments can stay invested. Money you might need within five years generally should not be in the stock market at all.
Second, keep buying on a schedule if you can. Putting a fixed sum in every month, known as dollar-cost averaging, means a falling market buys you more units for the same dollars. A bear market is the part of the cycle where regular investing quietly does its best work, because you are accumulating at lower prices. The danger is the opposite reflex: stopping contributions, or selling, exactly when prices are cheapest.
Third, do not try to call the bottom. Nobody reliably does, and the strongest rebound days cluster right at the worst of the gloom, so sitting in cash to avoid the pain usually means missing the recovery too. If you are still building wealth and decades from retirement, a bear market is closer to a sale than a disaster. If you are near or in retirement, the calculus changes: you should already be holding more in bonds and cash so you are not forced to sell shares at a low. New to all this, the how to start investing in Singapore guide covers setting up before the first downturn arrives.
Not everything falls by the same amount in a bear market. Some companies and sectors are more sensitive to the economic cycle than others, and that difference is worth understanding before a downturn rather than during one.
So-called defensive sectors sell things people keep buying even when money is tight: groceries, electricity, telecoms, basic healthcare. Their earnings hold up better, so their shares tend to fall less. Cyclical sectors are the opposite. Banks, property developers, travel and luxury goods swing harder with the economy, which is why a bear market often hits them first and hardest. On the Straits Times Index this matters a lot, because the three local banks make up close to half the index, so the STI behaves like a fairly cyclical, finance-heavy basket.
Quality is the other thing that travels well through a downturn. Companies with low debt, steady cash flow and a real competitive edge are better placed to ride out a slump and keep paying dividends, while weaker firms can be forced into rescue fundraising or worse. This is not a reason to abandon a diversified portfolio and chase individual defensive names. It is a reason to know what you own and why, so a 30% drop in a cyclical holding does not catch you off guard.
A common question is whether anyone profits while the market drops. Some do, through a technique called short selling, but it is the wrong tool for almost every young investor and worth understanding mainly so you can leave it alone.
Short selling means borrowing shares you do not own, selling them now, and hoping to buy them back cheaper later to return them, pocketing the difference. It is the only common way to profit directly from falling prices, which is why short interest tends to rise in a bear market. The catch is the risk profile. When you buy a share, the most you can lose is what you paid. When you short one, your loss is theoretically unlimited, because the price can keep rising against you with no ceiling, and a sharp rebound can wipe out a position fast.
For most people the realistic answer to a falling market is not to bet against it but to keep accumulating through it. Lower prices mean your regular monthly contributions buy more units, so the bear market quietly improves your future returns without any borrowed shares or borrowed money. That is the boring, durable way to come out ahead, and it does not require a single correct call about where the bottom sits.
The money you are not investing still needs a home, and a bear market is a good reminder that safe, boring options exist. None of these are likely to beat shares over the long run, but they keep your emergency fund and short-term savings intact while markets sort themselves out.
Singapore Savings Bonds are fully backed by the government and can be redeemed any month with no penalty. The June 2026 tranche carries a 10-year average return of about 2.11% per year, with the first-year rate lower and later years higher. Treasury bills, fixed deposits and high-interest savings accounts are the other usual homes; the SSB vs T-bill vs fixed deposit comparison lays out the trade-offs. Bank deposits and Singapore-dollar accounts at a Scheme member are insured by the SDIC up to S$100,000 per depositor per bank, so spreading larger sums across banks keeps everything covered.
The point is not to chase yield on this slice of money. It is to make sure that when shares are down 25%, you have cash you can spend without touching them. That separation is what lets the rest of the plan work.
At least 20% from its most recent peak, measured on closing prices. A fall of 10% to 20% is called a correction, and anything smaller is a dip or pullback. The 20% line is an industry convention rather than a precise rule, so treat it as a marker of how deep the downturn is.
On the S&P 500 the average bear market has run about 9.6 months and fallen around 35%, though they vary widely. The 2020 Covid bear lasted roughly a month, while the 2000 to 2002 dot-com bust took more than two years. The bull markets that follow have averaged 2.7 years and a 112% gain.
A bear market is about share prices falling 20% or more. A recession is about the wider economy shrinking, measured by output, jobs and spending. They often overlap but not always. Since 1928 there have been 27 bear markets but only around 15 recessions, and markets usually start recovering before the economy does.
For a young investor with years until you need the money, selling at the bottom locks in losses and risks missing the recovery, since many of the market's best days happen during bear markets. The usual advice is to keep an emergency fund, keep contributing on a schedule, and only hold shares with money you will not need for at least five years.
If you have spare cash you will not need soon, lower prices mean you buy more units for the same dollars, which is why regular investing works well during downturns. The catch is that nobody can call the exact bottom, so spreading purchases out over time through dollar-cost averaging is safer than trying to time one big buy.
Yes, several times. It fell roughly 60% during the 2008 Global Financial Crisis and about 35% during the early 2020 Covid crash, dropping from a high near 3,400 points to around 2,210 in weeks. It recovered both times and later crossed 5,000 points for the first time in February 2026.
On the S&P 500, roughly once every 3.5 years on average since 1928, with 27 bear markets recorded. They are a normal part of investing rather than a sign that something is permanently broken, and across about 95 years the market has spent only around 21 of those years in bear territory.
The most-watched signals are an inverted yield curve, where short-term government bonds pay more than long-term ones, plus narrowing market breadth, stretched valuations, rising interest rates and falling consumer confidence. None is reliable on its own. They fire early and often without always leading to a downturn, so they are better treated as context than as a signal to sell.
Defensive sectors tend to fall less, because they sell things people keep buying when money is tight, such as groceries, utilities, telecoms and basic healthcare. Cyclical sectors like banks, property and travel usually fall more. The Straits Times Index leans cyclical because the three local banks make up close to half of it. Companies with low debt and steady dividends also weather long downturns better.
Some traders profit from falling prices through short selling, which means borrowing shares, selling them, and buying them back cheaper. It carries theoretically unlimited losses and is not suited to most long-term investors. The simpler way to come out ahead is to keep contributing on a schedule, since lower prices mean your regular investments buy more units that gain value when the market recovers.
This is general financial information for Singapore, not personal financial advice. Figures change — verify current rates against the official sources above before acting. See our full disclaimer.