Bull Markets, Bear Markets And Corrections Explained

If you are trying to understand bull market vs bear market, you will quickly run into a third phrase: market correction.

These terms are everywhere in investing news. One headline says shares have entered a correction. Another says a new bull market has begun. Someone on social media says the bear market is over. It can sound as if these labels are precise signals, but they are usually much looser than that.

The simple version is this: bull markets, bear markets and corrections are names people use to describe big market moves. They are useful vocabulary, but they are not magic warnings, predictions or instructions.

Nothing here is financial advice. I am explaining the language so you can read market commentary without feeling like everyone else got handed a secret dictionary.

Quick answer: bull market vs bear market vs correction

Fidelity’s bull and bear market explainer highlights the variation in bull market definitions. Its correction guide explains the commonly used 10% threshold and the distinction from a deeper bear market.

These are conventions used in market commentary. They are not precise signals about what prices will do next.

Investing involves risk and capital is at risk. Markets can fall as well as rise. Past performance is not a reliable guide to future returns.

What is a bull market?

A bull market describes a period of generally rising prices. It does not mean every share rises or that every day brings a gain.

Some commentators call a 20% rise from a recent low a new bull market. Others look at the broader upward trend without using one exact percentage. That is why I check the definition behind a headline before drawing conclusions from it.

The word bullish describes an optimistic view about future prices. That is an opinion, which is different from measuring a move that has already happened.

What is a bear market?

A bear market commonly means a market index has fallen at least 20% from a recent high. An index is a measure used to follow a group of investments, such as a basket of shares.

The label does not tell us how much further prices might fall. It also does not mean prices must go down every day. A rebound during a wider decline is possible, so a few rising days do not settle what happens next.

Bearish describes a pessimistic view about future prices. It is not proof that a fall is coming.

What is a market correction?

A correction is commonly a drop of at least 10% but less than 20% from a recent high. If the fall reaches 20%, commentators generally use the bear market label instead.

The word can sound reassuring, as though prices are simply returning to the right level. But the label does not establish fair value or promise that the decline is nearly over.

It is not automatically a crisis or a buying opportunity. It describes the size of a fall so far.

Why these labels are usually applied after the move

Bull market, bear market and correction labels are often only obvious after prices have already moved.

That matters because beginners can accidentally treat the labels as if they are early warnings.

For example:

• “The market is in a correction” does not mean it will stop falling at 10%
• “The market is in a bear market” does not mean it will keep falling
• “The market is in a bull market” does not mean it cannot drop tomorrow
• “The bear market is over” is often only clear with hindsight

Markets do not send a polite notification saying, “This is now the bottom.” They move first and people name the move afterwards.

That is one reason I am cautious with dramatic market commentary. A label might be accurate, but it still might not be useful for deciding what happens next.

Bull and bear markets can depend on what you are looking at

Another source of confusion is that “the market” is not one single thing.

A global stock market index might be rising while UK smaller companies are struggling. Technology shares might be in a bull market while another sector is flat. Bonds might be falling while shares are rising. Even within a single country, different indices can tell different stories.

So when someone says, “we are in a bull market”, I always want to know: which market?

Are they talking about:

• A broad global index?
• The US stock market?
• The UK stock market?
• A specific sector?
• A single share?
• Crypto?
• Bonds?

The label only makes sense when you know what it is being applied to.

A simple example

This is a hypothetical example using index points, not an actual market or a forecast. Imagine a broad market index reaches a high of 100.

If it falls to 90, that is a 10% drop from the high. Commentators may call it a correction.

If it falls to 80, that is a 20% drop from the high. Commentators may call it a bear market.

If it later rises from 80 to 96, that is a 20% rise from the low. Some may start talking about a bull market.

But notice something awkward: the index at 96 is still below the old high of 100.

This is why headlines can feel confusing. Under the 20% rise convention, a market can rise enough from a low to be described as entering a bull market, while still not being back to where it started. The label depends on the reference point. Going from 80 back to 100 would require a 25% gain, because the recovery starts from a smaller base.

Why this matters for beginner investors

I do not think beginners need to memorise market history to the nearest percentage point. But I do think these terms matter because they shape how headlines feel.

“Market falls 10%” sounds factual.

“Market enters correction” sounds more dramatic.

“Bear market begins” can sound terrifying.

“New bull market confirmed” can sound like an invitation to rush in.

That emotional pull is the danger. If a phrase makes you feel like you must do something immediately, it is worth slowing down.

For me, understanding the language helps me pause before reacting. It does not remove the need to review whether my investments still fit my circumstances. The FCA’s golden rules of investing explain why trying to time short-term market moves carries risk and why a longer time horizon still does not guarantee a gain.

For the emotional side of a falling market, I have written about my first market drop. For the difference between day-to-day price movements and wider investment risks, see volatility explained and investment risk explained.

Common beginner misunderstandings

”A bear market means I have lost money forever”

Not necessarily.

A lower quoted value is a real reduction in what an investment is currently worth, even if I have not sold it. It might recover, fall further or never recover. The bear market label cannot tell me which outcome to expect or how long a recovery might take.

”A bull market means investing is safe”

No.

A bull market can make risk feel invisible, which is when beginners can get overconfident. Prices rising recently does not remove risk. A recent rise does not tell me whether an investment is suitable for my circumstances.

Capital is at risk in bull markets too.

”If I know the label, I know what to do”

This is the big one.

Knowing the label can help you understand the news. It does not create a personal plan. Your time horizon, risk tolerance, emergency savings, debts, tax position and goals all matter. I cannot know those from a market headline and neither can a social media post.

Nothing on this site is financial advice or a personal recommendation. If you are unsure what is suitable for you, speak to a regulated financial adviser. You can also read my site-wide disclaimer.

What I take from these labels

Bull market, bear market and correction are useful terms. They help describe whether prices have risen, fallen a bit or fallen a lot.

But they are not forecasts.

A correction can recover or become a bear market. A bear market can keep falling or start recovering. A bull market can continue or reverse. The label tells you what has happened, not what must happen next.

That is the main lesson I want to keep in mind as a beginner investor: learn the vocabulary, respect the risk and do not mistake market labels for instructions.