Bull and bear markets: definitions, corrections and history

A bull market is a long stretch of rising stock prices. A bear market is a deep, sustained decline. The names are old market slang, usually explained by how each animal attacks: a bull thrusts its horns up, a bear swipes its paws down. The terms sound informal, but investors, journalists and analysts use fairly specific conventions to apply them, and knowing those conventions helps you read headlines without panic or euphoria.

This guide explains the common definitions, the difference between a pullback, a correction and a bear market, what history shows about how deep and how long declines have been, and a real example from the last five years: the 2022 bear market and the sharp correction of early 2025.

The usual definitions

There is no regulator or exchange that declares a bull or bear market. The labels are conventions that market commentators apply, most often to a broad index such as the S&P 500.

A few details matter more than they seem:

• Duration. The SEC's Investor.gov glossary describes a bear market as a fall of 20% or more in a broad index "over at least a two-month period", and a bull market as a 20% rise over the same minimum span. Many commentators skip the time test, which is why the very fast 2020 decline is usually still called a bear market.
• Closing prices. Most commentators measure from closing highs to closing lows, not intraday extremes. An index can briefly cross 20% during a session without "officially" entering a bear market.
• Which index. The S&P 500, the Nasdaq Composite and the Russell 2000 can be in different states at the same time. The Nasdaq, heavy in technology, often falls further.
• Hindsight. A bear market's start date is the prior peak, which is only known once prices are already 20% below it. Its end is the low, which is only known after prices have risen well off it.

What a market cycle looks like

Markets don't move in tidy phases, but a full cycle often includes a few recognizable stages:

1. Recovery. After a bear market low, prices rise while news is still poor. Pessimism is widespread, so modest improvement surprises investors.
2. Expansion. Earnings grow, the economy is healthy and prices climb steadily.
3. Late cycle. Optimism is high, valuations are stretched and investors take on more risk. Some sectors start to lag.
4. Decline. A shock, rising rates, falling earnings or a recession sends prices down. Selling feeds on itself as fear spreads.

The stages can be skipped or repeated, and their timing varies enormously. They describe investor psychology as much as economics: prices move on changes in expectations, and expectations swing further than reality.

Two recent declines on real data

The 2022 bear market. On weekly closes in Finabase's data, SPY peaked at $474.96 in the week of December 27, 2021 and fell to $357.18 in the week of September 26, 2022, a decline of 24.8%. On daily closes, the S&P 500 index's low came in October 2022. The cause was a combination of high inflation and the fastest rise in US interest rates in decades, which pushed down the value of both stocks and bonds. SPY's weekly close did not return above its old high until the week of December 25, 2023, about two years after the peak.

The 2025 correction. SPY peaked at $609.70 in the week of February 10, 2025 and fell to $505.28 in the week of March 31, a 17.1% decline on weekly closes. On daily closes the S&P 500 index fell 18.9% from its February 19 high (6,144.15) to its April 8 low (4,982.77), just short of the 20% line. Prices recovered the whole decline by the end of June 2025. Whether you call it a "near-bear market" or a "deep correction" depends on which data you use, which shows how arbitrary the 20% threshold is.

The longer history

On monthly closes, SPY has had four declines of roughly 20% or more since its launch in 1993:

Monthly data understates fast declines. The 2020 crash, about 34% on daily S&P 500 closes, lasted barely a month, and most of it was gone within five months. The 2000 and 2007 bear markets were slower and much more damaging: SPY's monthly closes took years to regain their former highs.

The What is a stock? A complete beginner’s guide to shares guide charts SPY's whole history on a log scale. What both views show is that bear markets are common, painful and, for a diversified index, have so far been temporary. Individual stocks are another matter: many never recover their peaks.

How investors respond, and the mistakes that cost the most

Selling after the fall. The most expensive mistake is turning a temporary paper loss into a permanent one by selling near the low. Because the gain needed to recover is larger than the loss (a 25% fall needs a 33% rise), missing the early rebound can cost years.

Waiting for certainty. Bull markets usually begin while news is still bad. By the time the economy looks clearly healthy, prices have often already risen a long way.

Assuming a bull market will continue. Long advances encourage investors to take more risk just as valuations are highest. A portfolio that felt comfortable in a bull market may be too aggressive for the next bear.

Over-reading labels. "Correction," "bear market" and "crash" are descriptions of what already happened. They do not predict what comes next.

What tends to help is unglamorous: a mix of assets matched to your time horizon, an emergency fund so you are never forced to sell stocks to pay bills, and regular contributions that buy more shares when prices are low. The Risk and return: volatility, drawdowns and the equity premium guide covers how to measure and size that risk, and the Compound interest: how growth on growth builds wealth guide shows why staying invested matters so much.

Bull versus bear at a glance

How Finabase helps

The indices page tracks the major US and global indexes, and the market overview shows the day's moves across indexes, sectors and the biggest gainers and losers. The heatmap shows at a glance whether a sell-off is broad or concentrated in a few sectors. Any symbol's chart, such as SPY, lets you switch to multi-year ranges and measure past declines yourself.

Frequently asked questions

What percentage drop is a bear market?

By convention, a bear market is a decline of 20% or more from a recent closing high. A decline of 10% up to 20% is usually called a correction.

How long do bear markets last?

They vary widely, from about a month in 2020 to more than two years in 2000–2002. Most modern bear markets in the S&P 500 have lasted months rather than years, but recovering to the prior high can take much longer than the fall.

Who decides when a bear market starts?

No one officially. The 20% convention is applied by commentators and data providers, usually to the S&P 500 on closing prices, and only in hindsight once the decline has reached that depth.

Can you predict a bear market?

Not reliably. Warning signs such as high valuations or rising rates can persist for years before a decline, and declines sometimes begin with little warning.

Summary

Bull and bear markets are names for the long rises and deep falls that every stock market goes through. By convention a correction is a 10% to 20% decline and a bear market is 20% or more, measured on closing prices, while a new bull market is dated from the low once prices rise 20% from it. The labels are applied in hindsight and depend on the index and the data used, as SPY's 24.8% fall in 2022 and its 17% weekly-close correction in 2025 show. History says declines are normal and, for broad indexes, have so far been recovered, sometimes quickly and sometimes over years. The decisions you make during a decline matter far more than what it is called.