Which situation best describes a bear market?

A bear market is defined as a market condition where prices of securities are falling or are anticipated to fall by 20% or more from recent highs. This situation typically reflects a widespread pessimism among investors, which can stem from various factors, including poor economic indicators, rising unemployment, or geopolitical tensions. During a bear market, investor confidence declines, leading to sell-offs as people aim to limit their losses, further driving down prices.

In this context, the reference to a drop of 20% or more is significant because it quantifies the extent of the decline that characterizes a bear market. This level of decrease suggests that a substantial downturn is present, influencing investor sentiment and market behavior.

The other options depict contrasting market conditions, such as optimism among investors, rising stock values, or high trading volumes, none of which align with the characteristics of a bear market. These distinctions highlight the negative psychology and market conditions that define a bear market, making the correct choice stand out as a clear depiction of such a scenario.