Bull and bear markets
Also called Bull market
Names for sustained periods of rising prices (bull) and falling prices (bear) in a market, most often the stock market.
What it means
A bull market is a long stretch of rising prices and generally optimistic investors. A bear market is commonly defined as a decline of 20% or more from a recent high, while a drop of about 10% is usually called a correction. These labels are informal conventions and are typically applied after the fact.
U.S. stock market history includes many of both. Bull markets have historically lasted longer than bear markets, but bear markets can be sharp and it can take years for prices to recover. No one reliably predicts when one turns into the other, which is why many investors focus on an allocation they can hold through both.
Example
Suppose a stock index peaks at 5,000 and falls to 4,000. That 1,000-point drop is a 20% decline, which meets the common definition of a bear market.
How it’s used
- Describing the direction of markets in news and commentary
- Stress-testing a portfolio against a large decline
- Setting expectations about the ups and downs of investing
Related terms
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