What typically triggers a primary bear phase?

A primary bear phase is typically triggered by factors that signal economic downturns or deteriorating market fundamentals. Selling due to decreased earnings is a critical factor because it reflects the underlying financial health of companies. When investors perceive that earnings are declining, it leads to a loss of confidence in the market, prompting widespread selling. This can create a snowball effect, where the more prices fall, the more the fear of further declines compels investors to sell their holdings, ultimately solidifying the bear market.

In contrast, speculation becoming dominant and prices rising usually marks a speculative bubble rather than a bear phase. Reviving confidence from a primary bear market suggests a shift from negative sentiment to positive, which would indicate a transition out of a bear phase rather than the initiation of one. Lastly, horizontal price movement within a narrow range does not typically signify a definitive bear market; instead, it may indicate a consolidation phase, where the market lacks a clear direction. Thus, decreased earnings are the primary catalyst for triggering a bear phase, as they directly impact investor sentiment and market dynamics.