What Is a Bear Market? Are We in One?

President Trump’s global tariffs have sent stock markets worldwide into a tailspin, and the S&P 500 on Monday briefly entered bear market territory for the first time since 2022.

Mr. Trump has seemed unmoved by the decline. He signaled on Monday that he had no plans to back off on tariffs, insisting that they would bring in “billions of dollars” in revenue and that other countries had been “abusing” the United States with their trade policies.

Here is what to know about a bear market.

What is a bear market?

A bear market is a Wall Street term for a sustained market downturn, when a stock index closes 20 percent from its last peak.

The 20 percent threshold signals investor pessimism about the future of the economy.

Are we in a bear market now?

The S&P 500, the benchmark U.S. stock index, opened lower on Monday. The index was already down 17.4 percent from its last high, on Feb. 19, and if it closes Monday’s trading with a loss of at least 3.1 percent, that would tip it into a bear market.

Analysts at Morgan Stanley have warned that an even steeper drop is possible. Goldman Sachs on Monday slashed its forecast for economic growth, citing a growing risk of a U.S. recession next year.

The Nasdaq Composite Index, as well as the Russell 2000 index of smaller companies that are more vulnerable to the economic outlook, are already in a bear market.

This sounds ominous. What should I do with my money?

A market decline can offer opportunities for investors with long horizons. Investing in diversified, low-cost index funds has been a successful strategy over the years, through bull markets and bears.

But given the deepening concern that Mr. Trump’s trade agenda could set off a severe economic downturn, volatility and uncertainty are high. People with shorter investment timelines, as well as those nearing retirement, often shift more assets into bonds, which have historically shown greater resilience during downturns.

When was the last bear market, and how long does one last?

The U.S. stock market has always recovered from declines, usually within a couple of years. In early 2020, the outbreak of the coronavirus set off global shutdowns, causing a short, sharp bear market. The Federal Reserve intervened, and markets regained their losses in six months. In late 2021, fears of surging inflation leading to sharply higher interest rates pulled the S&P into a bear market in early 2022, which lasted for much of the year.

The S&P has entered a bear market 15 times since 1929. Bear markets have lasted 18.9 months on average, according to Howard Silverblatt, senior index analyst for S&P Dow Jones Indices.

How do bear markets affect the economy?

Bear markets are sometimes precursors to recessions, but not always.

Recessions, defined by the National Bureau of Economic Research as “a significant decline in economic activity that is spread across the economy and lasts more than a few months,” are much more perilous for the economy. Recessions often lead to job losses as economies contract, such as in the summer of 2020, when unemployment levels rose to their worst levels since the Great Depression.

What will happen next?

Mr. Trump on Monday repeated his calls for the Federal Reserve to cut interest rates. But the Fed does not seem in a hurry to intervene.

Jerome H. Powell, the Fed chair, said on Friday that the central bank needed to assess the economic effects of the tariffs before taking action, and he has warned that cutting rates could fan inflation.

A new wave of Trump tariffs that are set to take effect this week could lead to even more turmoil in the markets. When asked by reporters on Sunday about the market turmoil and fears of a recession, Mr. Trump said that “sometimes you have to take medicine to fix something.”