The animal names
A bull market is a long period of rising prices and optimism. A bear market is a drop of 20% or more from a recent high, usually with widespread pessimism. The names come from how each animal attacks: a bull thrusts its horns up, a bear swipes down.
Corrections and crashes
A correction is a decline of 10% to 20% from a recent peak. Corrections are common and often recover within months. A crash is a sudden, steep drop, often in days or weeks. These labels are conventions, and nobody can tell in real time whether a drop will stop at 10% or go on to 30%.
What drives the cycle
Markets move on a mix of company profits, interest rates, the economy, and the mood of investors. See how interest rates affect stocks. Our Market Mood gauge on the home page is our own estimate of whether investors are leaning fearful or greedy.
Living through declines
History is full of declines that felt permanent at the time and were later recovered, but not on a schedule, and not for every individual stock. A few practical ideas investors use:
- Decide your stock and bond mix before a decline, based on how much loss you can tolerate.
- Keep money you will need within a few years out of the stock market.
- Keep investing on a schedule. See dollar-cost averaging.
- Avoid making big decisions based on a single bad week.
A loss needs a bigger gain
A 20% fall needs a 25% gain to get back to even, because you are working from a smaller base. A 50% fall needs a 100% gain. That arithmetic is why big losses are costly and why diversification matters.
Quick answers
How long do bear markets last?
They vary widely, from a few months to a few years. There is no reliable way to predict the length of one in advance.