Bull Markets, Bear Markets, and What They Mean

Turn on any financial broadcast and you will hear about bulls and bears. The metaphor comes from how each animal attacks: a bull thrusts its horns up, a bear swipes its paws down.

The definitions

• Bull market: a sustained period of rising prices, generally marked by a gain of 20% or more from a recent low. Optimism, confidence, and rising valuations dominate.
• Bear market: a sustained decline of 20% or more from a recent high. Pessimism, fear, and falling valuations take over.
• Correction: a shorter, milder drop of 10% to 20% — common, and not the same as a bear market.

The asymmetry worth knowing

Historically, bull markets last much longer than bear markets and gain more than bears take away. Bear markets, while painful, have tended to be measured in months; bull markets often run for years. Over the long arc, markets have risen far more than they have fallen — which is why long-term investors are rewarded for staying invested.

Why the label matters less than your behavior

Knowing you are in a bear market does not tell you what to do next — no bell rings at the bottom. What history does suggest:

• The worst days and the best days cluster together. Missing just a handful of the market's best days, which often arrive in the middle of scary stretches, can devastate long-term returns.
• Selling in fear locks in losses and forces a second hard decision: when to get back in. Most people get that timing wrong.

How seasoned investors treat them

They expect bear markets as the price of admission for long-term gains, keep contributing through the downturns (buying at lower prices), and avoid making permanent decisions based on temporary moods.

The takeaway

Bulls and bears are vivid labels for normal phases of a cycle that, over time, has trended up. The useful response to either is the same: keep your plan, keep contributing, and do not let the animal of the moment make your decisions.