Bull vs Bear Markets

A bull market is a period when prices are generally rising and optimism is high, while a bear market is a sustained decline of roughly 20 percent or more from recent highs, marked by pessimism. These terms describe the overall mood and direction of the market rather than any single stock. Markets cycle between the two over time.

Knowing the market phase helps set expectations, but trying to time the switch is notoriously difficult. Long-term investors often keep investing steadily through both phases, since bear markets historically recover and reward patience. Use bear markets as opportunities to buy quality companies at lower prices rather than reasons to panic sell.

From a recent peak, if a broad index falls from 5,000 to 4,000 points, that 20 percent drop signals a bear market. When it later climbs steadily back above the old high, sentiment turns bullish and a new bull market is underway.