Quick answer
A bull market is a period of rising stock prices and optimism; a bear market is a period of falling prices and pessimism. Investor.gov says each generally means a move of 20% or more in a broad market index over at least two months [1] [2].
Key points
- Bull = prices rising and sentiment optimistic; bear = prices falling and sentiment pessimistic.
- The usual threshold is a 20% move in a broad index over at least two months — a convention, not a law.
- A loss needs a larger percentage gain to recover: a 20% fall needs a 25% rise to get back to even.
- Bull and bear phases are only clear after the fact, so the labels do not tell you what happens next.
- Plans built on goals, time horizon and diversification are designed to work through both.
#What is a bull market?
Investor.gov, the SEC's investor education site, defines a bull market as "A time when stock prices are rising and market sentiment is optimistic. Generally, a bull market occurs when there is a rise of 20% or more in a broad market index over at least a two-month period" [1]. Market sentiment means the overall mood of investors — whether they expect things to get better or worse.
A broad market index is a measure that covers a large part of the market, such as the S&P 500, rather than a single sector. If you are unsure what an index measures, start with what a stock market index is.
#What is a bear market?
The mirror image. Investor.gov describes a bear market as "a time when stock prices are declining and market sentiment is pessimistic. Generally, a bear market occurs when a broad market index falls by 20% or more over at least a two-month period" [2].
Bull vs bear at a glance
Bull market
- Prices rising
- Sentiment optimistic
- Generally a rise of 20% or more in a broad index
- Over at least two months
Bear market
- Prices falling
- Sentiment pessimistic
- Generally a fall of 20% or more in a broad index
- Over at least two months
#How do you measure a 20% move?
A bear market is measured from the most recent peak (the high point) to the trough (the low point). A bull market is usually measured upward from a trough. That leads to a surprise for many beginners: a new bull market can begin while prices are still well below their old high.
Worked example
One hypothetical year: bear, then bull
A made-up broad index peaks at 4,000 in January. It falls to 3,150 by May and bottoms at 3,000 in July. It then climbs to 3,700 by November and 4,100 by the next January.
- January peak → May (3,150 ÷ 4,000 − 1)
- −21.25%: past the 20% bear line
- January peak → July low (3,000 ÷ 4,000 − 1)
- −25.00%
- July low → November (3,700 ÷ 3,000 − 1)
- +23.33%: past the 20% bull line
- November level vs January peak (3,700 ÷ 4,000 − 1)
- −7.50%: still below the old high
- Next January vs original peak (4,100 ÷ 4,000 − 1)
- +2.50%
By November the index met the usual bull-market test, measured from the low — yet anyone who bought at the January peak was still down 7.5%.
Hypothetical index levels. Percentages calculated in Python.
The hypothetical index from the example
- Index level
#Why does it take a bigger gain to recover from a loss?
Percentages work on a moving base. After a fall, the next gain is calculated on a smaller amount, so it has to be larger in percentage terms to get back to where you started.
| Fall | Value after the fall | Gain needed to recover |
|---|---|---|
| −10% | $9,000 | +11.11% |
| −20% | $8,000 | +25.00% |
| −30% | $7,000 | +42.86% |
| −40% | $6,000 | +66.67% |
| −50% | $5,000 | +100.00% |
The formula is 1 ÷ (1 − fall) − 1, calculated in Python for each row. It is one reason a bear market can feel so long: even after prices turn up, it can take a large rise just to get back to the old level.
#Do bear markets mean you should sell?
This page does not tell anyone to buy or sell. What regulators stress is planning. Investor.gov notes that stocks have historically had the greatest risk and highest returns among the three major asset categories, and that large company stocks as a group "have lost money on average about one out of every three years" [3]. It adds that investors "that have been willing to ride out the volatile returns of stocks over long periods of time generally have been rewarded with strong positive returns" [3] — a description of the past, not a promise about the future.
FINRA, the Financial Industry Regulatory Authority, suggests clarifying your financial goals, staying diversified and avoiding impulsive decisions when markets turn volatile [4]. It also warns that scammers operate in all market conditions and to be wary of promises of "risk-free" returns [4]. Two related guides: diversification explained and dollar-cost averaging.
A calm checklist for either kind of market
Re-read your goal and time horizon
Investor.gov defines time horizon as the expected number of months, years or decades you will be investing to reach a goal [3]. Money needed soon should not depend on stock prices.
Check your mix
A long bull market can leave you holding more stocks than you planned. Rebalancing brings the mix back to your target.
Look at the fees and leverage you carry
Borrowed money magnifies losses in a falling market. Read how margin accounts work before using one.
Be extra careful with unsolicited offers
Pitches that promise to beat the market or protect you from a crash deserve more suspicion, not less.
Common beginner mistakes
Thinking the label predicts the future
A bear market is only confirmed after a 20% fall has already happened, and a bull market after a 20% rise. The label describes the past.
Mixing up "bull from the low" with "back to even"
As the example shows, the index can be in a new bull market and still be below its previous high.
Measuring with your own portfolio instead of an index
The definitions use a broad market index. Your own holdings can be up or down far more, depending on what you own.
Taking on more risk late in a long rise
Strong past gains can tempt people to add leverage or concentrate in recent winners — just as the risk of a bigger fall grows.
What's the bottom line?
Bull and bear markets are labels for long rises and falls in a broad index, usually set at 20% over at least two months. They describe what has already happened, and the math of losses means recovery takes a larger gain than the fall. The practical response is the same in both: a plan tied to your goals and time horizon. Next, read market volatility explained for the day-to-day swings in between.
Frequently asked questions
Why are they called bull and bear markets?
The origin is not certain. A common explanation is that a bull thrusts its horns upward while a bear swipes its paws downward, but treat that as folklore rather than documented history.
Is a 10% fall a bear market?
Not by the usual definition. Investor.gov's description of a bear market uses a fall of 20% or more in a broad index over at least two months. Smaller falls are often called pullbacks or corrections.
Can a single stock be in a bear market?
People sometimes say so informally, but the Investor.gov definitions refer to a broad market index, not individual shares.
How long do bull and bear markets last?
There is no fixed length. Each one ends only when the opposite move begins, which is clear only in hindsight. This page does not forecast when any market phase will start or end.
Sources
Grade A = primary source (regulator, government agency, official rulebook or the index provider's own documents). Numbers in brackets in the text point here.
- U.S. SEC — Investor.gov. Bull Market (glossary) (2026). Accessed 2026-10-03.A
- U.S. SEC — Investor.gov. Bear Market (glossary) (2026). Accessed 2026-10-03.A
- U.S. SEC — Investor.gov. Beginners' Guide to Asset Allocation, Diversification, and Rebalancing (2026). Accessed 2026-10-03.A
- FINRA. Investor Tips for Turbulent Markets (2026). Accessed 2026-10-03.A
This page is general education, not personal financial, tax or legal advice. Figures in worked examples are hypothetical and calculated before taxes and fees unless stated. Rules and limits change; check the linked primary sources for the current version. How we check every page.
