Bull Markets vs. Bear Markets: What the Terms Mean

Financial headlines frequently describe markets as bullish or bearish. These terms are useful shorthand for broad market trends, but investors should understand what they mean without allowing the labels to dictate a long-term plan.

What is a bull market?

A bull market generally describes a sustained period of rising prices and positive investor sentiment. The term can refer to stocks or other markets.

What is a bear market?

A bear market generally describes a substantial, sustained decline from a recent high. A commonly used stock-market convention is a decline of 20 percent or more, although terminology and measurement can vary.

Markets move in cycles

Economic growth, corporate profits, interest rates, inflation, valuations, investor expectations, and unexpected events can all influence market cycles. The start and end of a cycle are much easier to identify in hindsight.

Emotions can become expensive

Strong markets can encourage overconfidence and fear of missing out, while falling markets can trigger panic. Decisions driven primarily by recent price movement can cause investors to buy high or sell low.

Keep the label in perspective

Bull and bear labels describe market conditions; they do not predict what happens next. A diversified plan based on goals, time horizon, and risk tolerance can provide a more durable framework than reacting to headlines.

Educational note: This article is for general educational purposes and does not provide individualized investment, tax, or legal advice. Investing involves risk, including possible loss of principal.