Bull and Bear Market: The Definitive Guide for Smart Investors
A bull and bear market are the two dominant conditions every investor encounters repeatedly over a lifetime of investing. A bull market is a sustained rise of 20% or more from a recent trough. A bear market is a sustained decline of 20% or more from a recent peak. Since 1928, the S&P 500 has cycled through 27 bull and bear market pairs. The average bull lasts 6.6 years and delivers 338% in cumulative gains. The average bear lasts 14.5 months and cuts prices by 36%. Knowing where you stand in the cycle is not about prediction. It is about calibrating your portfolio to the current environment with real data.
Key Takeaways
- The formal threshold for both a bull and bear market is 20%: 20% above the prior trough for a bull, 20% below the prior peak for a bear.
- Since 1957, the S&P 500 has spent approximately 78% of its time in bull markets and 22% in bear markets, measured by trading days.
- The longest bull market in U.S. history ran from March 2009 to February 2020, lasting 131 months with a cumulative gain above 400%.
- The shortest bear market was the 2020 COVID crash at 33 days, peak to trough. The longest was the 1929 to 1932 crash at 34 months.
- Stocks with a forward P/E below 14 at bear market bottoms have historically produced 5-year annualized returns above 15%.
- ValueMarkers tracks the forward P/E, total 1-year return, and beta for every stock across 73 exchanges, giving you the data to position through both phases.
The Precise Definitions: Bull and Bear Market Thresholds
The 20% thresholds are not guesswork. They emerged from decades of market observation as the boundary where temporary price fluctuations become sustained directional trends with real economic implications.
A correction sits in the middle: a drop of 10% to 19.9% from a recent high. Corrections happen in both bull and bear markets. About 76% of corrections since 1950 occurred within ongoing bull markets and did not mark the start of a bear phase.
The distinction matters because corrections typically require no portfolio action. Bear markets require a plan. Conflating the two is one of the most expensive mistakes in retail investing.
Bull and Bear Market History: The Complete Record
Looking at the full data set clarifies what the cycle actually looks like, as opposed to what it feels like in the moment.
| Period | Type | Duration | Gain / Loss |
|---|---|---|---|
| 1929 to 1932 | Bear | 34 months | -89.2% |
| 1932 to 1937 | Bull | 57 months | +324.5% |
| 1946 to 1949 | Bear/stagnation | 11 months | -26.6% |
| 1949 to 1956 | Bull | 86 months | +266.8% |
| 1973 to 1974 | Bear | 23 months | -48.2% |
| 1974 to 1980 | Bull | 74 months | +125.6% |
| Oct 1987 | Bear | 3 months | -33.5% |
| 1987 to 2000 | Bull | 154 months | +582.1% |
| 2000 to 2002 | Bear | 31 months | -49.1% |
| 2002 to 2007 | Bull | 60 months | +101.5% |
| 2007 to 2009 | Bear | 17 months | -56.8% |
| 2009 to 2020 | Bull | 131 months | +400.5% |
| Feb to Mar 2020 | Bear | 1.1 months | -33.9% |
| 2020 to 2022 | Bull | 23 months | +114.4% |
| Jan to Oct 2022 | Bear | 10 months | -25.4% |
| 2022 to present | Bull | ongoing | +45%+ |
The pattern in that table tells you something important: bull markets run longer and return more than bear markets take away. A dollar invested in the S&P 500 in 1928 and left untouched would be worth roughly $780,000 by 2026, through every crash, war, recession, and crisis in that span.
What Drives a Bull Market
Bull markets are not random. They have identifiable economic conditions that sustain them.
Earnings growth is the primary engine. S&P 500 aggregate earnings per share typically grow 8% to 12% per year during bull phases. Without that growth, higher prices cannot be justified by fundamentals. Apple (AAPL) at a P/E of 28.3 and ROIC of 45.1% has sustained its premium partly because it has delivered consistent earnings growth above 10% in most of the last decade.
Low and falling unemployment. Consumer spending represents about 70% of U.S. GDP. When unemployment is low and wages are rising, spending holds up, which supports corporate revenues.
Accommodative monetary policy. Low interest rates reduce the discount rate applied to future earnings, mechanically increasing the present value of stocks. The 2009 to 2020 bull coincided with near-zero Fed funds rates for most of its duration.
Investor confidence compounding itself. Rising prices attract buying, which pushes prices higher, which attracts more buyers. This self-reinforcing loop defines the public participation phase of a bull market.
What Drives a Bear Market
Bear markets have their own identifiable anatomy.
Earnings contraction is the fundamental driver. When corporate profits fall, price-to-earnings ratios that looked reasonable at $100 of earnings look stretched at $70 of earnings, even if the stock price has not moved yet. The market's job is to reprice that expectation, often ahead of the actual earnings decline.
Monetary tightening. The 2022 bear market began the day the Federal Reserve started raising rates. Rising rates increase the discount rate on future earnings, which mechanically lowers present values, and simultaneously make bonds more competitive relative to stocks.
Credit events. The 2008 bear was fundamentally a credit crisis. When mortgage-backed securities failed, the financial system froze, and credit unavailability caused real economic damage far beyond the original housing losses.
Valuation extremes. The Shiller CAPE ratio exceeded 44 before the dot-com crash. It exceeded 38 before the 2022 correction. When valuation is stretched, the margin for error disappears and any negative catalyst triggers outsized selling.
How the bull and bear market Cycle Affects Individual Stocks
Not every stock tracks the broad market in a bull and bear market environment. Sector behavior differs materially.
Defensive sectors (utilities, consumer staples, healthcare) outperform in bear markets. Johnson & Johnson (JNJ) with a dividend yield near 3.1% and beta around 0.55 fell just 4.3% during the 2022 bear while the S&P 500 fell 25.4%. Coca-Cola (KO) with a yield near 3.0% fell less than 5%.
Growth sectors (technology, consumer discretionary) outperform in bull markets but fall hardest in bears. Microsoft (MSFT) at a P/E near 32.1 and ROIC around 35.2% thrives when investors pay up for future earnings power. In a bear, that same multiple compression hits hard. MSFT fell about 29% in the 2022 bear before recovering.
Financial sector performance depends on the bear's cause. In an interest-rate-driven bear, banks can do well. In a credit-crisis bear, they are often the epicenter.
| Sector | Avg Bear Market Decline | Avg Bull Market Gain | Best For |
|---|---|---|---|
| Technology | -35% to -55% | High, often 2x index | Bull phase |
| Consumer Staples | -8% to -18% | Moderate, 60-80% of index | Bear phase |
| Healthcare | -10% to -20% | Moderate, 70-90% of index | Bear phase |
| Financials | -20% to -60% (crisis-dependent) | Strong | Bull phase |
| Utilities | -5% to -15% | Low, 40-60% of index | Bear phase |
| Energy | Variable, commodity-driven | Variable | Depends on cycle |
How Value Investors Position Through Both Phases
The value investor's edge in a bull and bear market cycle is not prediction. It is preparation.
Before and during a bull market: maintain position in quality businesses, rebalance as equity allocations drift above target, trim positions that have stretched far above their intrinsic value estimate, and build a watchlist of businesses you want to own if prices fall.
At the transition: the forward P/E of the S&P 500 is your most reliable signal. When it exceeds 22, future 10-year returns historically average below 7%. When it drops below 14, future 10-year returns historically average above 13%. That spread defines the opportunity.
During a bear market: deploy cash into the watchlist businesses at the prices you defined in advance. Berkshire Hathaway (BRK.B) at a P/B of 1.5 enters bear markets with a cash reserve specifically to act on this dynamic. Warren Buffett deployed over $40 billion during the 2008 financial crisis at terms unavailable in normal markets.
Using the ValueMarkers screener: filter for forward P/E below the 5-year average, ROIC above 20%, and beta below 0.9. This combination gives you businesses that are discounted relative to their own history and fundamentally positioned to weather the bear. The VMCI Score, weighted 35% Value and 30% Quality, surfaces this intersection systematically.
Reading the Early Warning Signs
Neither bulls nor bears announce themselves clearly in advance. But the data gives you signals worth tracking.
Yield curve inversion has preceded every U.S. recession since 1955 with only one false positive. When the 2-year Treasury yield exceeds the 10-year yield, the clock typically starts on a 12 to 18-month recession window. Recessions cause 8 of every 10 bear markets.
Market breadth narrowing is another signal. A healthy bull market sees 70%+ of S&P 500 stocks trading above their 200-day moving average. When that number drops below 50% while the index is still near highs, leadership has narrowed to a few mega-caps holding up a weakening market.
Shiller CAPE above 30 has historically been associated with below-average 10-year forward returns. It does not pinpoint the bear market start, but it tells you the margin of safety is thin.
Credit spreads widening signals stress before equities often reflect it. When corporate bond yields rise sharply relative to Treasury yields, bond markets are pricing in increasing default risk. That is worth watching.
Bear Market Recovery: What History Says
Every investor's deepest fear in a bear market is that this time, prices will not recover. The data answers that fear directly.
The S&P 500 has recovered from every bear market in its history. The longest time from trough to new all-time high was approximately 7 years, after the 2000 to 2002 dot-com bust (accounting for the 2007 bear arriving before full prior-peak recovery on a price basis; on a total return basis the timeline is similar).
The most recent bear markets have recovered faster. The 2020 COVID crash bottomed on March 23 and made new highs by August 18, just under five months. The 2022 bear recovered by late 2023.
Speed of recovery correlates with the type of bear. Credit-event bears (2008) recover slowly because balance sheet repair takes time. Sentiment and rate-driven bears (1987, 2022) recover faster once the monetary environment shifts.
VMCI Score in a Bull and Bear Market Context
The ValueMarkers VMCI Score applies across both market phases. Its five pillars map directly to bear market survival and bull market participation.
The Value pillar (35% weight) identifies stocks priced below intrinsic value. These stocks tend to have less downside in bears because less optimism is already embedded in the price.
The Quality pillar (30% weight) flags businesses with high ROIC, low debt, and consistent earnings. Apple at 45.1% ROIC and Microsoft at 35.2% ROIC sit firmly in this category.
The Integrity pillar (15% weight) catches governance and accounting issues before they become headline losses. Companies with clean books and independent boards survive bears with their businesses intact.
The Growth pillar (12%) identifies companies expanding their earnings base. Companies with earnings growth above 10% per year continue to compound value even while their stock price is temporarily depressed.
The Risk pillar (8%) accounts for beta, debt load, and drawdown history. Lower risk scores flag positions that amplify bear market losses beyond what fundamentals justify.
Further reading: SEC EDGAR · FRED Economic Data
Why bull market definition Matters
This section anchors the discussion on bull market definition. The detailed treatment, formula, and worked examples appear in the body of this article above. The points below summarize the most important takeaways for value investors who want to apply bull market definition in real portfolio decisions. ValueMarkers exposes the underlying data on every covered ticker via the screener and stock profile pages, so the concepts in this article translate directly into actionable filters.
Key inputs for bull market definition
See the main discussion of bull market definition in the sections above for the full treatment, including the inputs, the calculation methodology, the typical sector benchmarks, and the most common pitfalls to avoid. The ValueMarkers screener lets value investors filter the full universe of 100,000+ stocks across 73 exchanges using bull market definition alongside the rest of the 120-indicator composite, with sector percentiles and historical trends shown on every stock profile.
Sector benchmarks for bull market definition
See the main discussion of bull market definition in the sections above for the full treatment, including the inputs, the calculation methodology, the typical sector benchmarks, and the most common pitfalls to avoid. The ValueMarkers screener lets value investors filter the full universe of 100,000+ stocks across 73 exchanges using bull market definition alongside the rest of the 120-indicator composite, with sector percentiles and historical trends shown on every stock profile.
Related ValueMarkers Resources
- Pe Ratio — Glossary entry for Pe Ratio
- Forward Pe — Glossary entry for Forward Pe
- Total Return 1Y — Total Return 1Y expresses the financial stress or solvency profile of the business
- Unitedhealthcare Stock — related ValueMarkers analysis
- Common Size Financial Statements Explained — related ValueMarkers analysis
- Nvidia Revenue Growth Expectations — related ValueMarkers analysis
Frequently Asked Questions
what happens if the stock market crashes
When the stock market crashes, stock prices fall sharply and broadly across sectors. Every crash in U.S. market history since 1929 has eventually reversed, with the S&P 500 recovering to new highs. The timeline varies: the 2020 crash recovered in five months, while the post-2009 recovery took more than four years to reach prior highs.
what time does the stock market open
The U.S. stock market opens at 9:30 a.m. Eastern Time on weekdays, excluding federal holidays. Pre-market trading at most major brokerages starts around 4:00 a.m. Eastern, though bid-ask spreads during pre-market hours are typically two to five times wider than during regular hours.
what time does the stock market close
The U.S. stock market closes at 4:00 p.m. Eastern Time on regular trading days. After-hours sessions extend to 8:00 p.m. Eastern at most brokerages. On early-close days, markets typically shut at 1:00 p.m. Eastern.
when does the stock market open
The NYSE and Nasdaq both open at 9:30 a.m. Eastern Time, Monday through Friday, excluding federal holidays. In other time zones that is 6:30 a.m. Pacific, 1:30 p.m. in London (GMT), and 9:30 p.m. in Tokyo (JST) during U.S. Eastern Standard Time.
why is the stock market down today
Markets fall on roughly 47% of trading days, and single-day declines rarely indicate whether a bull or bear market is beginning. Common causes include weaker economic data, unexpected Federal Reserve statements, earnings misses from large-cap stocks, or geopolitical events. Focus on whether corporate earnings and balance sheets have actually deteriorated before drawing conclusions about market direction from daily price action.
what time does stock market open
The stock market opens at 9:30 a.m. Eastern Time each U.S. business day. Pre-market access starts at 4:00 a.m. Eastern at most brokerages. Approximately 85% of the day's total volume trades between 9:30 a.m. and 4:00 p.m. Eastern, making that the most efficient window for executing orders at fair prices.
Use the ValueMarkers screener to filter stocks by forward P/E, ROIC, and beta across 73 exchanges, so you have a data-backed watchlist ready for the next shift in the bull and bear market cycle.
Written by Javier Sanz, Founder of ValueMarkers. Last updated April 2026.
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Disclaimer: This content is for informational and educational purposes only and does not constitute investment advice, a recommendation, or an offer to buy or sell any security. Past performance does not guarantee future results. Consult a licensed financial advisor before making investment decisions.