Bull Market vs Bear Market: What They Mean
A bull market is a stretch of rising prices and optimism; a bear market is a sustained fall of pessimism. These two words describe the overall mood and direction of the market.
The quick definitions
A bull market is a period when prices are generally rising and investors feel confident. A bear market is the opposite: prices are falling and caution or fear dominates.
These terms usually describe a whole market — a market index like the S&P 500 or S&P/TSX Composite — rather than a single stock, though people apply them loosely to individual stocks and even whole sectors.
The 20% rule of thumb
There's no official committee that declares these, but a widely used guideline is:
- A bear market is commonly defined as a drop of 20% or more from a recent high, sustained over time.
- A bull market is the recovery and extended rise that follows, often measured as a 20%+ climb from a recent low.
A smaller dip of about 10% is usually called a correction — uncomfortable, but milder than a full bear market.
Why "bull" and "bear"?
The popular explanation points to how each animal attacks: a bull thrusts its horns upward, matching rising prices, while a bear swipes its paws downward, matching falling ones. Whatever the true origin, the imagery stuck, and today "bullish" simply means optimistic and "bearish" means pessimistic.
What each phase tends to feel like
In a bull market
Rising prices, growing confidence, strong economic news, and often heavy buying. The risk is that optimism can tip into overconfidence, pushing prices far above what businesses are really worth — a setup that has preceded past bubbles like the dotcom bubble.
In a bear market
Falling prices, nervous headlines, and fear that can feed on itself. Bear markets are painful, but historically they have not lasted forever. Major examples include the 2008 financial crisis and the sharp, brief 2020 COVID crash.
How investors relate to the cycle
Markets have historically moved through repeating cycles of bull and bear phases, though the length and depth of each varies enormously and past patterns never guarantee future ones. Because the timing of turns is so hard to call, many long-term investors focus on staying diversified and thinking in years rather than reacting to every swing. Others study why stocks move to better understand what's driving a given phase.
The takeaway: "bull" means up and hopeful, "bear" means down and fearful. They're vocabulary for describing market conditions — useful for reading the news, but not a crystal ball for what comes next.
Frequently asked
What is the difference between a bull market and a bear market?
A bull market is a stretch of rising prices and optimism, while a bear market is a sustained fall marked by pessimism. Both terms usually describe a whole market index rather than a single stock, and 'bullish' simply means optimistic while 'bearish' means pessimistic.
What is the 20% rule for bull and bear markets?
A bear market is commonly defined as a drop of 20% or more from a recent high, sustained over time, and a bull market as a rise of 20% or more from a recent low. There is no official committee that declares these, so the 20% figure is a widely used rule of thumb rather than a strict law.
What is the difference between a correction and a bear market?
A correction is usually a decline of about 10% from a recent high, while a bear market is a deeper drop of 20% or more. A correction is uncomfortable but milder, and not every correction turns into a full bear market.
Why are they called bull and bear markets?
The popular explanation is that a bull thrusts its horns upward, matching rising prices, while a bear swipes its paws downward, matching falling ones. Whatever the true origin, the imagery stuck, and the terms now describe the overall mood and direction of the market.
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