What is a bull market? Definition, phases and how to spot one
A bull market is a sustained rise in prices, commonly defined as a gain of 20% or more from a recent low, usually driven by strong earnings and optimism.
What a bull market is
A bull market is a period in which prices rise broadly and persistently, accompanied by improving earnings, rising confidence and growing participation. The term applies to any market — stocks, a single share, gold, crypto — but is most often used for major stock indices. The image is usually explained by the way a bull attacks: thrusting its horns upward.
There is no official definition. The most widely used rule of thumb says a bull market begins when an index has risen 20% from its most recent significant low, and lasts until it falls 20% from a subsequent peak — the threshold for a bear market.
How it is measured — a worked example
Measured on closing prices, from the most recent low:
Gain from low = (current level − low) ÷ low × 100 Bull market threshold ≈ +20% from the low
Suppose an index bottoms at 3,000 after a sell-off. When it closes at 3,600, it is (3,600 − 3,000) ÷ 3,000 = 20% above the low, and commentators will say a new bull market has begun — dated, in hindsight, from the low at 3,000. Many traders also watch whether the index holds above its 200-day moving average as a sign of a healthy uptrend.
Phases and psychology
The investor John Templeton famously said that bull markets are born on pessimism, grow on scepticism, mature on optimism and die on euphoria. Early on, few believe the rise; later, rising prices pull in new money and valuations stretch; near the end, risk feels lowest precisely when it is highest.
Historically, bull markets in major stock indices have lasted considerably longer than bear markets and delivered gains that more than made up for the declines — one reason long-term investors try to stay invested rather than time every turn.
Limitations and common mistakes
The 20% line is arbitrary, and a bull market is only confirmed after the fact; in real time, a strong rally inside a bear market can look identical. An index-level bull market can also mask weak breadth, with a handful of giant stocks doing most of the lifting.
Currency matters too. In a high-inflation economy an index can rise strongly in local currency while falling in dollar terms; checking the move in a hard currency, or against inflation, tells you whether wealth really grew.
Frequently asked questions
How long does a bull market last?
There is no fixed length. Historically, bull markets in the S&P 500 have lasted several years on average — much longer than bear markets — but individual cycles have ranged from under two years to more than a decade.
What is the difference between a bull market and a bear market?
A bull market is a sustained rise, usually 20% or more from a low; a bear market is a sustained fall of 20% or more from a peak. The animals are said to reflect how each attacks: the bull upward with its horns, the bear downward with its paws.
Can you lose money in a bull market?
Yes. Individual stocks can fall while the index rises, and buying late in a bull market, near a peak, can lead to large losses when the trend turns.