The stock market is in bear territory. What does that mean?

The loosely defined investing benchmark has tremendous psychological weight and can make a real difference in a consumer’s financial plans

Traders at the New York Stock Exchange in Manhattan on Sept. 13. (Andrew Kelly/Reuters)

The heavy losses that have rocked Wall Street since the outset of 2022 manifested with stunning intensity last week, as investors once again grappled with the Federal Reserve’s aggressive campaign to clamp down on high inflation.

The central bank recently rose its benchmark interest — its fifth hike of 2022 — as policymakers brace for more economic head winds, souring sentiment on Wall Street and raising fears the United States is headed toward recession. A hearty chunk of the substantial pandemic-era gains Wall Street won have now evaporated, taking 401(k) and other investors along for the anxiety-inducing ride.

The S&P 500 tumbled further Monday, setting a new low for the year as it flounders in a bear market — meaning the index has lost 20 percent of its value since its most recent peak. The Dow Jones industrial average fell into its own bear market, bringing all three major indexes into prolonged negative territory. And since some view bear markets as a harbinger of recession, the souring mood can reinforce investor angst and potentially trigger even deeper losses.

Investors are up against what is probably “the most complex macro backdrop” in a century, according to Dan Ives, managing director of Wedbush Securities, as the economy reckons with the coronavirus crisis, supply chain breakdowns, a war in Ukraine, runaway inflation and rising interest rates.

While no one knows how long a bear market will last, past bears can offer some insight into what it means for the broader economy. Here’s why:

Perspective | Seven ways you can financially prepare for a recession