Lesson 7.4 · 4 of 5 · Markets and the economy
Bull, bear and sideways markets: market regimes and how long they last
A market regime is the way the market behaves for a stretch of time: rising (bull), falling (bear), sideways, with high or low volatility. A bear market usually means a fall of at least 20% from the peak, and a correction a fall of at least 10%. You recognise a regime late, often after it has changed.
Terms in this lesson
- Bull market
- A period in which the stock market rises at least 20% from its last low.
- Bear market
- A period in which the stock market falls at least 20% from its last peak.
- Correction
- A drop of 10-20% from a recent peak.
- Volatility
- How much the price usually goes up and down in a year.
What market regimes are
| Regime | What it means | An S&P 500 example |
|---|---|---|
| Bull (rising) | prices rise for a long time, with short dips along the way | with dividends, 4.4 times over from the end of 2008 to the end of 2019 |
| Bear (falling) | a fall of at least 20% from the peak | -25.4% on closing prices, 3 January to 12 October 2022 |
| Sideways | years with no clear direction | with dividends, $100 at the end of 1999 was $104.30 at the end of 2010 |
| High volatility | very large daily moves, both ways | March 2020: -12.0% on 16 March, +9.4% on 24 March |
S&P 500 closing levels: FRED (S&P Dow Jones Indices), Bloomberg. Returns with dividends: Aswath Damodaran (NYU Stern), our own calculations.
A line on a log scale for $100 invested in the S&P 500 with dividends at the end of 1999, using year-end values. It falls to $62.60 in 2002, rises to $113.70 in 2007, falls to $72.10 in 2008, is $104.30 in 2010, then climbs almost without pause to $320.70 in 2019; it drops from $486.20 to $398.50 in 2022 and reaches $738.80 in 2025. Year-end values hide the falls within each year.
Regimes have no borders drawn in advance. The sideways stretch of 2000-2010 held two deep falls: -37.4% with dividends from the end of 1999 to the end of 2002, and -56.8% on closing prices between October 2007 and March 2009, with a long rise in between. High volatility shows up mostly in falls, but also in the sharp rebounds that follow them.
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Create a free accountThe definitions: a bear market at -20%, a correction at -10%
Definition
Where do the thresholds come from?
They are conventions, not official market rules.
Investor.gov, the education website of the US Securities and Exchange Commission (SEC), says that generally a bear market occurs when a broad index falls by 20% or more over at least two months. The financial press calls a fall of at least 10% from a recent peak a correction. A new bull market is usually counted from the low, once prices have risen by at least 20%.
- -10% from the peakcorrection
- -20% from the peakbear market
- +20% from the lownew bull market
How long bull and bear markets have lasted on average
The figures come from Dimensional Fund Advisors’ study of the S&P 500 with dividends from 1926 to 2025: monthly returns until 1989, daily returns from 1990. There, a bear market is a period in which the cumulative return from the peak reaches -20% or lower, and a bull market is the rise after its low. Bull markets gained between 21% and 936%.
The average hides big differences. In 2020 the S&P 500 fell 33.9% on closing prices in just 33 days, between 19 February and 23 March. In 2022 the fall from peak to low took more than nine months.
Why you can’t know your market regime in real time
A peak only shows once prices have fallen from it. A low only shows once prices have risen. And the 20% line is crossed when much of the move has already happened. Here is how 2022 looked to someone following the S&P 500’s close day by day.
| Date | What happened | What was known then |
|---|---|---|
| 3 January 2022 | the peak: 4,796.56 | nothing: it looked like any other day |
| 13 June 2022 | first close more than 20% below the peak: 3,749.63 | “bear market”, 161 days in |
| 12 October 2022 | the low: 3,577.03 | nothing: nobody knew it was the low |
| 8 June 2023 | +20% from the low: 4,293.93 | “bull market”, 239 days later |
| 19 January 2024 | a new record: 4,839.81 | the bull market is dated from 12 October 2022 |
S&P 500 closing levels, without dividends: FRED (S&P Dow Jones Indices), Bloomberg, Reuters.
Lessons are educational. They are not a recommendation to buy or sell. Investing involves risk and you can lose money. Sources: Investor.gov (SEC) glossary, “Bear market”; Fox Business, definition of a correction (10 December 2018); Bloomberg, 8 June 2023 (the 12 October 2022 low of 3,577.03 and the close of 4,293.93); Reuters, 19 January 2024 (the close of 4,839.81 and the 3 January 2022 record of 4,796.56); S&P 500 closing levels for 2018, 2020 and 2022, FRED (S&P Dow Jones Indices, series SP500, accessed 29 October 2026); Dimensional Fund Advisors, “Bulls, Bears, and the Long-Term Benefits of Stock Investing” (S&P 500 with dividends, 1926-2025, June 2026); annual S&P 500 returns with dividends from Aswath Damodaran’s data set (NYU Stern, updated 5 January 2026), with our own calculations.