Bull Market vs Bear Market
A bull market is a sustained period of rising prices and investor optimism. A bear market is the opposite — a sustained fall in prices, traditionally defined as a drop of 20% or more from a recent peak. The labels are most commonly used for stock markets but apply to other asset classes too. Both are normal phases of market cycles.
Last reviewed on 2026-04-27.
Quick Comparison
| Aspect | Bull Market | Bear Market |
|---|---|---|
| Direction | Sustained rise in prices | Sustained fall in prices |
| Common threshold | No formal — often 20% rise from a low | 20%+ fall from a recent peak |
| Investor sentiment | Optimistic, confident | Pessimistic, fearful |
| Typical duration | Often years | Often months to a year or two |
| Economic backdrop | Growth, low unemployment, rising profits | Recession or fear of one |
| Typical investor behaviour | Buying on dips, taking more risk | Selling, fleeing to safety |
| Historical example (US S&P 500) | 2009–2020 expansion | 2008 financial crisis, March 2020 pandemic crash |
Key Differences
1. Direction and threshold
A bull market is loosely defined as a 20% rise from a recent low, though the term is also used informally for any sustained uptrend.
A bear market is more strictly defined: a 20% drop from a recent peak in a major index. A drop of 10–20% is usually called a "correction."
2. Sentiment
Bull markets are characterised by optimism. New investors enter, risk-taking expands, valuations stretch.
Bear markets are characterised by fear. Investors sell, valuations compress, and even good companies trade at lower multiples.
3. Duration
Bull markets historically last longer than bears — often years. The post-2009 U.S. bull ran for over a decade.
Bear markets tend to be shorter and sharper. Most last under two years; the 2008 bear lasted about a year and a half, the COVID-19 crash about a month.
4. Economic backdrop
Bull markets typically coincide with economic expansion, rising employment, and growing corporate earnings.
Bear markets often accompany or anticipate recessions, but not always — markets can fall on fear of recession that never materialises, or rise during periods that look weak in hindsight.
5. Investor behaviour
Bull markets tend to encourage risk: chasing winners, leveraging up, less attention to fundamentals.
Bear markets tend to encourage flight: selling losers, going to cash, avoiding new positions. Most behavioural finance damage happens here — selling at the bottom locks in losses.
6. Where the names come from
A bull attacks by thrusting upward with its horns — hence rising prices.
A bear attacks by swiping downward with its paws — hence falling prices. The metaphor goes back centuries; whether it's the original etymology is debated, but the imagery has stuck.
When to Choose Each
Choose Bull Market if:
- Describing periods of sustained price rises across markets.
- Setting expectations: bull-market returns are above-average; they don't persist forever.
- Encouraging caution about over-extrapolating recent gains.
Choose Bear Market if:
- Describing significant drawdowns in markets.
- Reminding investors that historically, every bear has been followed by a recovery.
- Setting context for portfolio decisions during volatile periods.
Worked example
From early 2009 to early 2020, the U.S. stock market enjoyed one of the longest bull markets on record — over 11 years of rising prices. In March 2020 the market entered a sharp bear market on COVID-19 fears, dropping over 30% in weeks. Within months, a new bull began. Most investors who held through the bear ended up well ahead of those who sold; the people who sold near the bottom and waited to "feel safe" before re-entering missed much of the recovery.
Common Mistakes
- "A bear market means the economy is bad." Not always. Markets price expectations, which can diverge from current conditions.
- "Bull markets last forever." They never have. The question is when, not if, they end.
- "Selling everything in a bear market is safe." It locks in losses and means missing the eventual recovery, which historically has always come.
- "Corrections become bear markets." Many corrections (10–20% drops) end before reaching bear territory. Most don't.
This is general educational information, not personalised advice. See the disclaimer for the full note.