A bull market is generally a period when a broad market index rises at least 20% over at least two months, accompanied by rising prices and optimistic sentiment. A bear market is the reverse: a broad market index falls at least 20% over at least two months, with declining prices and pessimistic sentiment. The 20% test is a commonly used convention from the SEC’s Investor.gov glossary—not a universal rule for every index or asset class.
The basic definitions
“Bull” and “bear” describe the condition of a broad financial market, not the performance of every security in it. Investor.gov, the SEC’s investor-education website, uses the word “generally” in both glossary definitions. That wording matters: the terms are practical labels used to describe a market’s direction and mood, rather than a legal classification that every market participant must apply in exactly the same way.
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Investor.gov states that, generally, a bull market occurs when a broad market index rises by 20% or more over at least a two-month period. Its bear-market entry says that a bear market occurs when a broad market index falls by 20% or more over at least two months. In both cases, the glossary also associates the direction of prices with prevailing sentiment: optimism during a bull market and pessimism during a bear market.
Investor.gov’s glossary describes a bull market as a rise of 20% or more in a broad market index over at least two months, and a bear market as a fall of 20% or more over at least two months.
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Bull market versus bear market at a glance
| Feature | Bull market | Bear market |
|---|---|---|
| Broad direction | Rising stock prices | Declining stock prices |
| Sentiment described by Investor.gov | Optimistic | Pessimistic |
| General index threshold | A rise of 20% or more in a broad market index over at least two months | A fall of 20% or more in a broad market index over at least two months |
The table describes the convention in Investor.gov’s glossary. It does not establish a required test for every country, index provider, exchange or type of investment.
Why the word “broad” is essential
The threshold is applied to a broad market index. An index is a measurement designed to represent a group of securities, so its movement is intended to describe market conditions across that group. A single company’s share price can rise or fall dramatically while the broad index moves in the opposite direction.
A company can fall without creating a bear market
Suppose one company loses 20% of its value while the broad index that represents the wider market is flat or rising. That company has experienced a severe decline, but the glossary’s broad-index definition has not been met. Calling the company’s decline a “bear market” would incorrectly expand a market-wide term to an individual security.
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The reverse is also possible. A broad index may meet the bull-market convention even though some companies in the index are falling. The label summarizes the index’s overall movement; it does not claim that every constituent has risen, or that every investor’s account has gained value.
How the 20% threshold works
The number is a measurement of change, and the time condition is part of the definition. A move of 20% must occur over at least a two-month period for the general convention to fit. A move that happens over a shorter period may be important, but it does not satisfy the full wording of the Investor.gov glossary entry.
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Hypothetical bull-market calculation
Imagine a broad index at 100 points. After two months, it stands at 120. The change is 20 points, or 20% of the starting level. If the index movement represents the broad market being measured, that hypothetical path reaches the glossary’s general bull-market threshold.
Hypothetical bear-market calculation
Now imagine the same index at 100 points falling to 80 after two months. The 20-point decline equals 20% of the starting level. That hypothetical broad-index move reaches the general bear-market threshold.
Why “at least” changes the interpretation
“At least two months” means the time requirement is a minimum, not a fixed two-month appointment. A qualifying move could take longer. The glossary wording does not say that the index must remain exactly 20% above or below a particular level for a specified number of additional days, nor does it prescribe one universal calculation method for all providers.
Price direction and investor sentiment
The bull-and-bear vocabulary captures two dimensions at once. The first is observable direction: prices in the broad index are rising or falling. The second is the mood associated with that direction. Investor.gov describes bull-market sentiment as optimistic and bear-market sentiment as pessimistic.
What optimism means in this context
Optimistic sentiment indicates that market participants, in aggregate, view conditions favorably enough to support a rising broad index. It is a description of prevailing attitude, not a guarantee that prices will continue upward or that every participant shares the same view.
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What pessimism means in this context
Pessimistic sentiment describes a market environment in which concern or negative expectations accompany declining prices. It does not identify the cause of the decline, tell you how long it will last, or predict the next market move.
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The glossary supplies the 20% movement and two-month period as the numerical shorthand. Sentiment supplies context for the label, but Investor.gov does not set a separate percentage score for optimism or pessimism. Two observers could describe the mood differently while looking at the same index data.
What the labels can—and cannot—tell you
They describe a condition, not a forecast
“Bull market” and “bear market” are descriptions of what a broad index and market sentiment have been doing. Neither term promises what happens next. A bull label is not a prediction of further gains, and a bear label is not a timetable for a recovery or a statement that prices must continue falling.
They do not prescribe a portfolio decision
The definitions alone do not say whether someone should buy, sell, hold, increase risk or reduce risk. Any such decision would require information outside these labels, including a person’s objectives, time horizon, finances and tolerance for loss. The terminology can help explain market conditions without becoming individualized investment advice.
They do not measure every asset class automatically
The cited wording is specifically about a broad market index. It does not establish that stocks, bonds, commodities, currencies, digital assets or every other asset class use an identical 20% convention. Applying the label to another market requires checking how that market or its index is defined.
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How to evaluate a claim that a market is bull or bear
When you see a headline using one of these labels, separate the claim into measurable parts rather than relying on the adjective alone.
- Identify the index. Check which broad market index the statement refers to. A company share, a narrow industry index and a broad market benchmark are different measurements.
- Confirm the direction. Determine whether the index has risen or fallen, rather than assuming the label from a single news story or a few trading sessions.
- Check the size of the move. The commonly cited threshold is 20% or more.
- Check the elapsed time. Investor.gov’s general wording requires at least two months for the threshold.
- Separate index results from your account. Your holdings may not track the broad index, so your personal result can differ from the market label.
- Treat the classification as a convention. Because the glossary says “generally,” another source may use a different index, reference point or dating practice.
This checklist helps prevent a short-lived move, a single-stock decline or a narrow sector result from being presented as a confirmed market-wide condition.
Common misunderstandings
“Any 20% loss is a bear market.”
No. The general definition refers to a fall of 20% or more in a broad market index over at least two months. A 20% decline in one company does not meet that scope, and a one-day or one-week move does not meet the stated time period.
“A 20% gain automatically settles the question everywhere.”
Not necessarily. A 20% gain in a broad index over at least two months fits the commonly used Investor.gov convention, but the glossary presents it as a general definition. Index providers and market observers can differ in how they select the benchmark and measure the period.
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“Bull means every stock is rising.”
No. A broad index is an aggregate measure. Its rise can coexist with declines in some individual stocks, just as an index decline can coexist with gains in others.
“Bear means the market is permanently damaged.”
No. The term describes a period of declining prices and pessimistic sentiment. It does not specify a cause, duration or eventual outcome.
“The terms tell me what to do.”
No. They are descriptive labels. A decision about a particular investment cannot be derived from the definition alone.
Why the convention remains useful
Even with its limits, the bull-and-bear framework gives readers a compact way to discuss broad market direction. Saying that an index has entered a generally recognized bull or bear phase communicates more than “prices moved today”: it points to a large movement measured over a sustained minimum period and connects that movement with the market mood described by Investor.gov.
The convention also imposes discipline on loose headlines. Asking “Which broad index?”, “How large was the move?” and “Over what period?” turns an impression into a checkable statement. Those questions are useful whether the answer ultimately supports the label or shows that a narrower or shorter-term event is being described.
Limits on comparing different bull and bear claims
Two articles can use the same words while referring to different indexes or dates. One may discuss a broad domestic stock index; another may discuss a different geographic market or a narrower benchmark. Their conclusions are not directly interchangeable unless the underlying index and measurement period match.
The Investor.gov glossary does not provide a universal rule for dating every market’s turning point, nor does the definition establish historical frequency, average duration or average size of bull and bear markets. Those are separate statistical questions and should not be inferred from the 20% convention itself.
The practical takeaway
A bull market generally means that a broad market index has risen at least 20% over at least two months, with optimistic sentiment. A bear market generally means that a broad market index has fallen at least 20% over at least two months, with pessimistic sentiment. The benchmark’s breadth, the two-month minimum and the word “generally” are all essential: they keep the terms from being mistaken for a single company’s performance, a one-day shock, a universal rule or a prediction.
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