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Hello everyone, welcome to the channel. You've probably heard the terms "bull market" and "bear market" a lot—usually before someone advises you to panic, get greedy, or do something in between. But you may have wondered what exactly makes a market “ bullish” and what “bearish.” And it's not just about whether stocks rose or fell on a particular day.
There is a very clear definition . There is a whole hidden layer to bull and bear markets that most people have never heard of. Understanding both can change your mindset as an investor, whether you're just starting out or have been building your long-term portfolio for several years. Perhaps this will help you form the right attitude towards both types of market .
So, a little context on where these terms came from in the first place. You know, a bull attacks by throwing its horns up. The bear attacks by striking with its claws from top to bottom. Actually, this is the etymology of the origin of the terms "bull" and " bear" markets. These terms are several hundred years old, originating from 18th-century London trade.
They've stuck around for so long because it's a surprisingly convenient shorthand for describing two environments that behave almost oppositely. And now the point where most people get confused. So, a “ bull” market is usually defined as a 20% increase from a recent low . A “bear” market is a 20% drop from a recent high.
Pay attention to what this definition is based on. It's not just about market optimism or pessimism. This is a specific, measured percentage movement in the markets over a specific period of time. And a volatile sideways market is automatically neither. For example, a 10% drop is usually just a correction .
This is not yet a "bear" market, as it has not crossed the 20 percent threshold. But here's where it gets interesting. Bull and bear markets can manifest themselves in different ways and operate on two time scales simultaneously. They can be long-term ( secular) or cyclical. So, a cyclical "bull" or "bear" market is usually a short-term movement.
This is exactly what most people talk about in normal conversations about the markets. A cyclical "bull" or "bear" market can last from 1 to 5 years. And there is also a long-term (secular) "bull" or "bear" market. This is usually a much larger process that underlies slower waves. A multi-year trend that can last an average of 13 to 16 years, and within which several cyclical " bull" and "bear" markets can occur without disrupting the overall trend.
And there is a big story behind this. So, if you look at the S&P 500 index since the 1920s, market historians typically define secular “bull” markets as the periods from 1921 to 1929, 1949 to 1968, 1982 to 2000, and 2013 to the present. Of course, there were numerous “bear” markets in between, lasting from the late 1920s to the late 1940s, from 1968 to 1982, and from 2000 to 2013.
So note something important about these secular “bear” periods. They don't necessarily mean that the market has been falling for 13 years in a row. Take, for example, the period from 2000 to 2013. It included the brutal dot-com crash of 2000–2002 and the financial crisis of 2007–2009, but in between was a very real cyclical “ bull” market.
An investor who bought assets at the very beginning of that bear market in 2000, for example , still had roughly zero inflation-adjusted returns 13 years later , despite the rallies he experienced. And perhaps that is one of the most important reasons why this distinction matters. During a secular "bull" market, cyclical " bear" markets are typically shorter, shallower declines that are quickly redeemed.
These are temporary setbacks within a larger uptrend. And during a secular "bear" market, " bull" periods are usually sharp, tradable rallies, which, however , later give way to a new decline. The good news is that there has never been a bear market, regardless of its duration, that did not eventually give way to a bull market, after which the markets eventually soared higher than they were before the bear market began.
So, in a bull market, rising prices usually give people confidence. So more people buy, which pushes prices up even more. This makes everyone even more confident. Credit becomes more accessible, companies find it easier to raise funds, hiring increases, and risk tends to be rewarded more often than punished.
So, this can be a self-reinforcing cycle, and it usually manifests itself sector by sector in a fairly predictable order. The most sensitive to the economy and growth parts of the market. For example, technology. It is also non-essential consumer goods and industry that are leading the movement. This is because they tend to benefit the most from rising confidence and cheaper credit.
A bear market goes through the same cycle in reverse. Falling prices make people nervous. This means more people are selling their stocks. This pushes prices even lower. And, of course, that makes everyone even more worried. Usually, in the background of such a " bear" market, economic difficulties associated with it arise.
For example, lending may become tighter and companies may become more cautious in spending and hiring. The sector that typically takes the lead is money flowing into more protected sectors: utilities, consumer staples, and healthcare . Now let's make all this more concrete, not abstract, because real history can be the best teacher.
Going back to the bear market of the 1970s, between 1973 and 1974, the S&P 500 index fell 48.2%. This was caused by an oil embargo imposed on stagflation, rising prices, and a weak economy— all at the same time. And in fact it did not reach a new nominal high until 1980, and taking into account inflation, the recovery actually came only in the early 1990s.
Now compare this to the bear market of 1980–1982. Then there was a 27% drop caused by the Fed's fight against inflation, when interest rates were raised to 20% to, so to speak, "deceive". Well, it actually led to a brutal and painful recession. Once inflation was brought under control, it took only 3 months from the low point to recover to a new high.
If you travel back to 1987, you will get a completely different lesson. The S&P 500 fell more than 33% in a matter of months, including one of the worst days in modern market history —October 19, 1987, when the index lost more than 20% in just one session. This was a time when the economy as a whole barely slowed down, because this crash was caused almost exclusively by market mechanisms and panic.
And there was no real economic deterioration to coincide with this. So , you have three bear markets, three completely different reasons, three completely different recovery times. It may be worth learning this pattern: the name " bear market" indicates the size of the movement, but in itself says nothing about how long it will last or what it will take to complete it.
A bull market, especially a long-term one , can also hide a specific psychological trap. It can start to seem normal, even boring, to see your portfolio grow during extended periods of bull markets. It is because of this self-confidence that people tend to take more risks than they would be comfortable with under normal circumstances.
So, some of the worst investment decisions in history were actually made in the latter years of the bull market, not at its beginning. And, of course, a bear market has the opposite trap. Every day of decline can be perceived as confirmation that the situation will only get worse, and this is exactly the emotional state that often leads to selling assets near the very bottom.
And it's also the most common way investors turn temporary paper losses into permanent real losses. Now for the main thing that really matters if you are a long-term investor and want to develop a healthier attitude towards both bull and bear markets . Historically, bull markets have lasted several years on average .
Bear markets in the past have mostly lasted 1 to 2 years. What does this mean? This means that a long-term investor spends significantly more time in a rising market than in a falling one, simply by staying in position. But here's a stronger argument: what happens if you try to outsmart the cycle instead of following it.
To bypass the simple hold strategy , you need to guess the peak of a bull market and exit, then guess the bottom of the bear market that follows and re-enter. And you'll have to do it over and over again, decade after decade, without ever making a mistake that would cost you more than just waiting patiently .
Professional fund managers with entire research teams usually cannot do this consistently. Honestly , the chances that you or I will do it better, time after time, are slim. And that's why the phrase "timing the market is more important than timing the market" is so important for long-term investors.
Bear markets end, and are inevitably followed by bull markets. Investors who benefit in the long run are mostly those who stayed invested throughout both phases of the cycle, not those who guessed when to enter or exit. Remember that long "bear" period we talked about from 2000 to 2013, when the market remained roughly unchanged after adjusting for inflation for 13 years?
It still rewarded those who continued to invest steadily, buying stocks at every stage of this stretch, as the bull market that began in 2013 made these accumulated stocks significantly more expensive. In other words, it was being in the game that made it work. The long-term level adds another element of context.
A 20% drop within a long bull market has historically behaved very differently than a 20% drop during a bear market, and no one can tell you for sure which one you are in at the time of the event. So, "bull" and "bear" markets are n't really about feelings of optimism or pessimism. These are measurable movements, under which lies a whole layer of trends, their own patterns of industry rotation, and historically different recovery times depending on what caused them.
The most important takeaway from all of this is that every bear market in history, whether cyclical or long-term, has eventually given way to a bull market that more than made up for previous losses. And the investors who benefited from this recovery were those who stayed in the market long enough to wait out the upswing, not those who tried to perfectly time the market to avoid the intermediate dips.
So long-term investing is a direct practical conclusion from everything that bull and bear markets actually teach . If this video helped you understand something that previously seemed unclear, subscribe, and we'll see you in the next issue.
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