Bull vs Bear: What the Words Actually Mean

A bull market is when prices have risen at least 20% from a prior low. A bear market is when prices have fallen at least 20% from a prior high. That's the technical definition almost no news anchor bothers to give you. Below 20% in either direction, you're in a correction (10-20%) or a pullback (under 10%). The labels exist because human attention needs categories. The market doesn't actually care about round numbers.

The way I think about it, the words are useful as shorthand and dangerous as forecasts. Calling a bull market is mechanical: prices went up 20%, this is now a bull. Calling a bear market is also mechanical: prices fell 20%, this is now a bear. What's not mechanical is what comes next, and that's where most of the chatter lives.

The 20% Cutoff Is Arbitrary, but Useful

20% isn't a law of nature. It's a convention that newsrooms standardized in the late 20th century, mostly because it's a clean number that triggers obviously and doesn't happen too often. A 19.8% drop and a 20.1% drop feel identical from the inside, but only one gets called a bear market. Don't put magical weight on it.

That said, the 20% rule is calibrated to something real. Pullbacks of 5% or 10% happen multiple times a year and rarely change anything about the underlying economy. Drawdowns of 20% or more historically map to actual recessions, real earnings declines, or major credit shocks. The threshold is a rough proxy for “something structural is going on,” not a forecast.

How Long Each Phase Tends to Last

Bull markets are longer than bear markets. That's the most useful fact about them. Across the post-1928 history of the S&P 500, bull markets have averaged roughly 4.5 years and 150% returns. Bear markets have averaged roughly 1.4 years and 35% drawdowns. The market spends most of its life going up. Most of the time you're hearing about an imminent bear, you're inside a bull.

The reason for the asymmetry is mechanical. Stocks represent the value of future profits, and corporate profits trend up over time as the economy grows. Bear markets are interruptions. Bull markets are the default state.

What Each Phase Actually Feels Like

A bull market feels boring most of the time. Prices grind higher, dips get bought in days, the news is mostly noise. Then there's a stretch near the top where it gets euphoric. Stocks you've never heard of are up 400%. People at parties tell you about their friend's cousin who quit his job to day-trade. That last leg can last a year or two before something cracks.

A bear market feels different. The first leg down is shock: a fast 15-25% drop in a few months. Then you get a relief rally, where prices bounce 10-15% and everyone calls a bottom. Then prices drop again, deeper, slower, and more boring. Most of the actual losses in a bear market happen in the second leg, not the first. By the bottom, nobody wants to talk about stocks. That's usually the buy signal in retrospect.

The Part Nobody Tells You

You only know you're in a bull or bear market in retrospect. The 20% threshold is calculated from a peak or trough that gets confirmed only later. We're always comparing today to a prior extreme, and that prior extreme keeps moving. That's why “is this a bull or a bear?” is usually the wrong question. The right question is closer to “is the regime I'm in supportive of risk-taking or not?” and that depends on rates, earnings, liquidity, and sentiment, not on a label.

One thing that's genuinely useful: every bull market in history has eventually ended in a bear market, and every bear market has eventually ended in a bull market. There has never been a permanent version of either. If you can hold your position through both phases, the geometry of compounding does most of the work.

The Take

I use the words because they're convenient. I don't use them as predictions. The interesting move is to ignore the labels and focus on whether you're still adding to a long-term position regardless of which phase the headline writers say we're in. Most of the people I know who built real money in stocks did it by being indifferent to the label. They kept buying through both, and the bear markets were when they got their best prices.