What is a bear market? What to know

Stocks are sharply swinging down, up, then down again on Wall Street as markets try to assess the potential damage from President Donald Trump ’s global trade war. European and Asian shares saw dramatic losses, the leading U.S. index is flirting with bear market territory, and oil prices are sagging.

Trump says he won’t back down on his sweeping new tariffs.

Countries are scrambling to figure out how to respond to the tariffs, with China and others retaliating quickly.

Trump’s tariff blitz fulfilled a key campaign promise as he acted without Congress to redraw the rules of the international trading system. It was a move decades in the making for Trump, who has long denounced foreign trade deals as unfair to the U.S.

The higher rates are set to be collected beginning Wednesday, ushering in a new era of economic uncertainty with no clear end in sight.

With talks of the economy in overdrive since the Trump's tariffs were announced, many economic terms have been thrown around, including "bear market" and whether the current state of the stock market brings us into bear market territory. But what exactly is a bear market and are we in one?

Here's what you need to know:

WHAT IS A BEAR MARKET?

All the tumult has dragged the S&P 500 close to 20% below its record, which it set less than two months ago. If it finishes the day below that mark, it would be a big enough drop that Wall Street has a name for it. A “bear market” signifies a downturn that’s moved beyond a run-of-the-mill 10% drop, which happens every year or so, and has graduated into something more vicious.

According to the U.S. Securities and Exchange Commission, a bear market is a period of time when stock prices have fallen at least 20% from recent market highs and the market outlook is pessimistic. Generally, that decline is over at least a two-month period.

The closing price of the S&P 500, which is an index that tracks the prices of 500 large publicly traded US companies, is used to gauge if the US stock market is in bear-market territory, according to the multinational investment services firm Fidelity.

EXPERTS WORRY OF A POSSIBLE BEAR MARKET

Wall Street could soon be in the claws of another bear market as the Trump administration’s tariff blitz fuels fears that the added taxes on imported goods from around the world will sink the global economy.

A bear market is a term used by Wall Street when an index such as the S&P 500 or the Dow Jones Industrial Average has fallen 20% or more from a recent high for a sustained period of time.

The last bear market happened from Jan. 3 to Oct. 12 in 2022. But this decline feels more like the sudden, turbulent bear market of 2020, when the benchmark S&P 500 index tumbled 34% in a one-month period, the shortest bear market ever.

The S&P 500, Wall Street’s main barometer of health, was down 1.2% in Monday afternoon trading. It’s now 18.4% below the all-time high it set on Feb. 19.

The Dow industrials fell 1.8%, and the tech-heavy Nasdaq composite, which already was in a bear market, dropped 0.9%.

WALL STREET WAKES UP TO MORE LOSES MONDAY

U.S. stocks are swinging Monday following a manic morning where indexes plunged, soared and then sank again as Wall Street tossed around a false rumor about President Donald Trump's plans for his trade war.

After trading began, the S&P 500 quickly sank 4.7% following even worse drops for financial markets worldwide amid worries that Trump's tariffs could torpedo the global economy. But it suddenly erased all of it and surged to a gain of 3.4%, which would have counted as its best day in years. Almost as quickly, the index that sits at the heart of many investors’ 401(k) accounts gave that up and was roughly flat in midday trading.

Other U.S. stock indexes also careened through shocking trading. The Dow Jones Industrial Average went from a loss of 1,700 points to a leap of nearly 900 before settling at a loss of 272 points, or 0.7%, as of 11 a.m. Eastern time. The Nasdaq composite was 0.7% higher.

The swings shook the market as a White House account on X said a rumor circulating that Trump was considering a 90-day pause on his tariffs was “fake news.” The intense and sudden moves show how hard financial markets are straining to see hopes that Trump may let up on his stiff tariffs, which economists see raising the risks of a global recession.

However, by the end of the trading day, stocks ended another tumultuous day lower as markets reel from President Trump’s latest threats to escalate his tariff fight.

The S&P 500 sank 0.2% Monday to 5,062.25. The Dow Jones Industrial Average fell 349 points, or 0.9% to 37,965.60, and the Nasdaq composite rose 15.48 points or 0.1% to 15,603.26. The Dow was earlier down as many as 1,700 points following even worse losses worldwide on worries that Trump’s tariffs could torpedo the global economy.

It then surged to a gain after a rumor circulated that Trump may pause his tariffs. But the White House quickly called that fake news, and Trump then threatened to raise tariffs further on China.

DOES A BEAR MARKET MEAN A RECESSION IS IN OUR FUTURE?

Does a bear market mean a recession is in our future? Not really, but maybe. Although people may believe that a bear market means a recession is in the future, the two don't necessarily go hand-in-hand. According to Fidelity, a quarter of bear markets haven't ended in a recession.

A recession is typically defined by two consecutive quarters of decline in economic activity -- specifically a decline in a country's inflation-adjusted gross domestic product (GDP) -- the value of all goods and services a country produces, according to the International Monetary Fund. It is important to note that very short periods of decline are not considered recessions.