Bull Market and Bear Market
A phase when stock prices generally rise is a bull market, and a phase when they fall is a bear market — a drop of about 20% from the peak is commonly used as the bear market threshold.
Bear market = a phase with a decline of roughly 20% or more from the peak
A bear market is a phase where fear pulls down the share prices of good companies as well, so for long-horizon investors it can be an occasion to look over the names they follow.
In plain terms
A bull market is a period when the stock market generally rises, and a bear market is a period when it generally falls. The names come from the image of a bull thrusting its horns upward and a bear swiping its paws downward.
Usually, when a benchmark index (such as the S&P 500 in the US) falls more than 20% from its peak, people say the market has entered a bear market. A smaller decline of around 10% is called a "correction" instead.
What it tells you
Bull and bear markets describe the "mood of the whole market" beyond individual stocks. In a bear market, shares of good companies get dragged down too, and in a bull market, even ordinary companies tend to ride the mood upward.
So a single stock's price movement mixes together what is happening at that company and what is happening across the whole market.
Formula
Bear market = a phase with a decline of roughly 20% or more from the peak Bull market = a phase recovering from the low and generally rising
What high or low means
A bear market is a phase where fear pulls down the share prices of good companies as well, so for long-horizon investors it can be an occasion to look over the names they follow. In a bull market, optimism grows and valuations (PER and the like) tend to rise.
That said, "whether we are in a bull or bear market right now" often only becomes clear in hindsight, so it is hard to declare in real time.
The simple formula "bear market = always a time to sell, bull market = always a time to buy" is risky. Attempts to call the direction of the whole market (market timing) go wrong often, even for professionals. It is safer to treat market phases as "background for understanding the mood."
Even in a bear market, not every sector falls the same way. Consumer staples and utilities, which are less sensitive to the economy, sometimes fall relatively less.
Bull and bear markets refer to the movement of market indexes. This term is background knowledge for understanding market news. (* Our screens cover the SEC-filed financials of individual companies and do not provide market indexes themselves.)
Metrics to read alongside
See it in real stocks
Search US stocks on Stocklore to see SEC-filing-based financial metrics alongside the sector benchmark.
This explanation is for information and reference only and is not a recommendation to buy or sell any security. Investment decisions and their consequences are your own.