Which statement best describes a bear market?

A bear market is best described as a market characterized by declining prices and negative investor sentiment. This condition typically occurs when there is a widespread belief that prices will continue to fall, leading to a decrease in investor confidence. Investors tend to sell their holdings in anticipation of further downturns, which perpetuates the cycle of declining prices.

Bear markets usually reflect broader economic downturns or significant negative news affecting market sentiment, such as rising unemployment rates or geopolitical instability. Understanding this concept is crucial for investors, as it influences their investment strategies and decisions during such periods.

The other choices provided do not accurately summarize the state of a bear market. For instance, a market characterized by increasing prices and high investor confidence describes a bull market, while steady and stable prices refer to a consolidation phase in the market. Unpredictable fluctuations, while they may occur in various market conditions, do not specifically relate to the consistent downward trend that defines a bear market.