Markets & macro

Bull and bear markets

Q: What is Bull and bear markets?

Sustained rises and falls, conventionally marked at 20%. A bear market is usually defined as a fall of 20% or more from the peak; a correction is 10%. These are arbitrary round numbers, but they shape how people talk and behave.

Sustained rises and falls, conventionally marked at 20%.

Full guide, with a simulator

Bubbles, crashes and why they keep happening

A bear market is usually defined as a fall of 20% or more from the peak; a correction is 10%. These are arbitrary round numbers, but they shape how people talk and behave.

Bull markets last far longer than bear markets on average, and rise by more than bears fall. This asymmetry is the single most important fact for a long-term investor, and the one most easily forgotten during a bear market.

Figure

The market moves first, and recovers first

Shares fall before the data does and start climbing while the news is still uniformly awful. Waiting for the news to improve means buying after the recovery has happened.

Why it matters

Knowing the base rates makes it easier to hold on when everything says sell.

The mistake everyone makes

Trying to sidestep bear markets. Missing a handful of the best days, which cluster near the bottom, devastates long-run returns.

Related terms

Recession

A meaningful, broad contraction in economic activity.

Drawdown

The fall from a peak to the following trough. The pain, measured.

Rebalancing

Selling what has grown and buying what has not, to restore your target mix.

See Bull and bear markets on a real company

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