Bull and bear markets: what the terms mean

Bull and bear are market slang for the two broad directions prices can take over a long stretch. A bull market is a period when prices rise for months or years and confidence is high. A bear market is a period of falling prices and gloom. A common way to remember it: a bull strikes upwards with its horns, a bear swipes downwards with its paws.

The terms are mostly used for a broad stock index, such as the S&P 500 in the US or the Euro Stoxx 50 in Europe, rather than a single share.

The 20% and 10% conventions

There is no official definition, but the financial press uses rough rules of thumb, measured from the most recent high or low:

Term	Usual convention
Bull market	A rise of 20% or more from a recent low
Correction	A fall of about 10%, but less than 20%, from a recent high
Bear market	A fall of 20% or more from a recent high
Crash	A very sudden, steep fall over days or weeks; no agreed number

These thresholds are round numbers chosen by habit. There is nothing special about a 19% fall compared with a 21% one, and crossing the line does not change how markets work. The labels are useful mainly as shorthand.

Corrections are a normal part of markets

Share prices move every day as investors react to news on profits, interest rates, the economy and much else (see what moves markets). Over time, drops of 10% or more have been a regular feature of stock markets, including during long periods when prices rose overall. Corrections have usually been shorter than bear markets, but there is no rule that one cannot turn into the other.

Historically, broad stock markets have gone through many bull and bear markets. Past patterns describe what happened; they do not tell you what will happen next or when.

Why nobody can reliably time them

It would be convenient to sell just before a bear market and buy back just before the next bull market. In practice, nobody has shown they can do this reliably:

• The turns are only clear afterwards. A 20% fall becomes “a bear market” only once it has happened. At the time, nobody knows if a 10% drop will stop there or keep going.
• Recoveries can start while the news is still bad. Markets look ahead, so prices sometimes rise while the economy is still weak.
• Some of the biggest daily rises have come in the middle of bad periods. Someone who is out of the market waiting for calm can miss them.
• Every trade has a cost, and in many countries selling at a gain can trigger tax.

This is why you will see confident forecasts of the next crash or the next boom in the news every year, and why such forecasts deserve caution. This site does not make such forecasts.

What the terms are useful for

The labels help describe the past and set expectations about risk. Anyone who owns shares will very likely live through falls of 20% or more at some point. How much of a fall a person can bear, financially and emotionally, depends on their own situation and timeline. Risk and return and diversification explain the ideas behind that, and a regulated adviser is the person to ask about your own circumstances.

Related terms you may hear

• Rally: a period of rising prices, often a short one.
• Bear market rally: a rise during a wider downturn that later fades.
• Volatility: how much and how fast prices swing up and down, in either direction.
• All-time high: the highest level an index has ever closed at.