A "bull market" or a "bear market" gets declared in financial headlines almost daily. The thresholds, like the names themselves, are conventions — useful shorthand, not financial laws of nature.
The Standard Definition
The most widely cited convention defines a bull market as a sustained rise in equity prices of 20% or more from a recent low, and a bear market as a decline of 20% or more from a recent high. Both are typically measured against a major index, most often the S&P 500 in U.S. coverage.
The 20% threshold is not enshrined in any law or regulation. It is a journalistic and analytical convention that became standard in the 20th century because it produced a roughly intuitive, comparable signal across cycles. Smaller moves — typically a 10% drop from a recent high — are usually labeled "corrections."
Where the Animals Came From
The origin of the terms is genuinely disputed. The most commonly cited explanation is that bulls attack by thrusting their horns upward, while bears swipe their paws downward. Whether or not the animal-behavior story was the original inspiration, the metaphor is at least four centuries old. There are references to "bear-skin jobbers" — speculators selling stock they did not yet own, betting on a fall — in early 18th-century London. The word "bull" appeared as the natural counterpart shortly afterward.
Bear Markets in Historical Context
Bear markets in the U.S. equity market are not unusual. Looking at S&P 500 history, broad declines of 20% or more have occurred multiple times across the 20th and 21st centuries, in connection with events that range from the Great Depression to the dot-com bust to the 2008 financial crisis to the brief but sharp drawdown in early 2020. The frequency, depth, and duration of these episodes have varied widely.
What is consistent across them is that bear markets have eventually been followed by recoveries, and bull markets have eventually given way to declines. This is a description of long-run market history, not a prediction.
What the Labels Don't Tell You
A "bear market" label says something specific and limited: that an index has fallen by at least 20% from its recent peak. It does not say why prices fell, how long the decline will last, or how the recovery will look. A 20% decline driven by recession concerns, by rising interest rates, by an exogenous shock, or by a single sector unwinding will all carry the same headline label and very different underlying dynamics.
The labels are also entirely retrospective. A bear market is only confirmed once the 20% threshold has been crossed, by which point much of the decline has already happened. The same applies on the way up.
A Useful Read, Not a Trigger
For long-term investors, the most practical use of these labels is as historical and contextual shorthand. They organize market history into recognizable episodes that can be studied, compared, and discussed. They are far less useful as a real-time signal to act, precisely because they are defined backward from peaks and troughs that are only obvious in hindsight.
This article is for general informational and educational purposes only and does not constitute financial, investment, tax, or legal advice. Consult a qualified professional before making any investment decision.