Bear Market vs Bull Market: What Investors Should Know Now

Somewhere around the third week of a drawdown, the same email lands in my inbox. It's always a variation of the same sentence: "Should I just sell everything and wait until things calm down?" A friend sent it to me in early 2022, right after the S&P had slid past the 20% mark. I remember typing a long reply, deleting it, and writing something shorter instead. The short version was this: the panic is real, but the strategy you built in a calm week is the one that has to survive the ugly one.

That's the entire problem with the bear market vs bull market question. It sounds like a vocabulary quiz. It isn't. It's a question about what you actually do with your money when the mood of the market changes, and most people only ask it once things have already gone wrong.

Let me walk you through what these two regimes actually are, why they're named after animals that fight each other, and what the honest answer looks like when someone asks you whether it's a good time to buy.

Bear market vs bull market: what actually separates them

The definition is mechanical, and that's the part most articles skip. A bear market begins when a broad index falls 20% or more from its most recent peak. Not 19%. Not "a bad month." Twenty percent, measured from the high, and it stays a bear market until the index recovers that ground or the cycle resets.

A bull market is the opposite condition: prices rising, generally toward new all-time highs, with enough momentum and breadth that most sectors participate. There's no official 20% threshold to enter one, which is why the two labels aren't perfectly symmetrical. The bear trigger is precise. The bull label is a judgment call.

Why is it called bull and bear market?

The names come from how the animals attack. A bull charges upward with its horns, tossing its head toward the sky. A bear swipes downward with its paws, dragging its prey to the ground. The imagery maps onto price direction: horns up, claws down.

There's a popular but shaky story that the terms originated with fur traders who sold bear skins before they'd caught the animal, betting on a future decline. It's a nice tale. Historians aren't convinced it's the real origin, and I'd rather admit that than pretend I know. What's certain is that the metaphor stuck because it's physical and easy to remember, which is more than you can say for most financial jargon.

The numbers behind the two regimes

Here's where the real information lives, and it's the thing the definitional articles leave out. Since the mid-twentieth century, bull markets in U.S. equities have lasted, on average, several years. Bear markets, when they arrive, typically run their course in well under two years, and often closer to a year.

I want to be careful here, because I've seen this stat mangled into fake precision all over the internet. The honest framing is directional rather than numerical: bulls run long, bears hit hard and leave faster. The magnitude of a bear is often larger per month than a bull's monthly gain, which is exactly why the pain feels so disproportionate to the duration.

That asymmetry is the whole game. If you're a long-term investor, the base rate is on your side, and it's on your side by a wide margin. The catch is that you have to survive the short, violent part to collect the long, patient part.

Are we in a bull or bear market right now?

People ask me this constantly, and I've started answering honestly: I don't know, and neither does the person telling you they do.

The label only becomes official in hindsight. By the time the financial press agrees we're in a bull market, a meaningful chunk of the recovery has already happened. By the time everyone agrees it's a bear, the decline is usually well advanced. This isn't a flaw in the system. It's the system.

What you can track without guessing:

• The distance from the last peak, expressed as a percentage. Under 10% is a correction. Past 20% is a bear.
• Whether the decline is broad or concentrated in a few sectors.
• Credit conditions. When borrowing gets genuinely tight, drawdowns tend to deepen.
• Your own reaction. If you're checking prices hourly, the market isn't the problem.

None of these tell you what happens next. They tell you what's happening now, which is a more useful thing to know.

Is 2026 expected to be a bull market or a bear market?

Nobody knows, and I'd treat any confident 2026 forecast with suspicion. What I can tell you is how to think about it. Year-ahead predictions from large institutions have a track record that ranges from mediocre to embarrassing. The same houses that called for a rough year have been wrong in both directions, repeatedly, and they keep publishing anyway because people keep reading.

The more useful question isn't "what will 2026 be?" It's "what's my plan if 2026 is a bear?" If you can answer that second question, the first one stops mattering so much. Build a portfolio that doesn't require you to be right about the calendar.

Is it better to invest in a bull or bear market?

Financially, the bear market is the better entry point. Full stop. Prices are lower, the same contribution buys more shares, and the eventual recovery multiplies a larger position.

Emotionally, the bear market is brutal, and that's why most people do the opposite of what the math rewards. I've watched friends who bought confidently at the top go completely silent about their portfolios at the bottom. The logic inverts exactly when it shouldn't.

The honest answer is that the best time to invest is whenever you have money to invest, provided your time horizon is long enough to ride out a drawdown. Trying to wait for the perfect bear bottom is its own trap, because the bottom only looks obvious in retrospect.

Here's how the two regimes compare on the dimensions that actually matter:

Factor	Bull market	Bear market
Typical duration	Years	Months
Entry prices	Higher, rising	Lower, falling
Investor mood	Confident, sometimes reckless	Fearful, sometimes paralyzed
Best action	Stay invested, rebalance	Keep contributing, don't sell
Common mistake	Chasing, over-concentrating	Panic selling at the low

Notice the "best action" row. In both regimes, the boring answer is the right one. That's not a coincidence, and it's the reason I stopped trying to guess the cycle years ago.

What is Warren Buffett's 70/30 rule?

This one needs a correction, because it gets repeated everywhere with the wrong owner attached.

The widely cited 70/30 rule — 70% in stocks, 30% in bonds or fixed income — is generally attributed to Benjamin Graham, Buffett's mentor, not to Buffett himself. Graham laid it out as a default allocation for the defensive investor, a baseline you'd shift within depending on how expensive or cheap stocks looked.

Buffett's own public guidance has been different. In his shareholder letters and in the instructions he's left for his estate, he's pointed toward a very heavy allocation to a low-cost index fund, with a small slice in short-term government bonds — something closer to 90/10 than 70/30.

Does the distinction matter? It does, because the two rules encode different risk tolerances. Graham's split is built for someone who wants to sleep at night through any cycle. Buffett's leans on a long horizon and a stomach for volatility. Pick the one that matches your actual behavior in a downturn, not the one that sounds more impressive.

What is the 7% rule in stocks?

Two different ideas share this name, which is part of why it confuses people.

The first is the rule of 72 applied to a 7% return: money growing at 7% a year doubles roughly every decade. That's the mental math investors use to reason about long compounding. Historical U.S. equity returns have averaged around that neighborhood over very long periods, though "average" hides enormous year-to-year swings, including plenty of losing years.

The second, and more dangerous, reading is the belief that you can safely withdraw 7% of a portfolio every year in retirement. That number is too high for most people over a multi-decade horizon. The conventional figure is closer to 4%, and even that gets debated. Pull 7% in a bad sequence of returns and you can run out of money.

So when someone quotes the 7% rule, ask which one they mean. If they mean the withdrawal rule, be careful. If they mean compounding, understand it's a long-run average, not a promise.

What to do in each regime

Strategy is where this stops being trivia. The bear market vs bull market distinction only earns its keep if it changes something about your behavior, and for most people it should change very little. That said, here's what I actually do.

In a bull market, my main job is to avoid getting bored and doing something stupid. Boredom is the underrated threat. When everything's rising, the temptation is to add leverage, pile into whatever just doubled, and convince yourself you're a genius. I've done a version of this. It cost me real money in a single stock I was convinced would keep climbing. It didn't.

In a bear market, the job flips: keep contributing on schedule, rebalance toward whatever's fallen hardest, and refuse to check the account more than once a week. Automated contributions are the single best defense against your own panic. If the money leaves your account before you can talk yourself out of it, you've already won.

A few moves that hold up in both:

1. Set your allocation and write it down somewhere you'll see during a crash.
2. Keep an emergency fund so a drawdown never forces you to sell.
3. Rotate toward defensive sectors when things get shaky — but don't abandon your core.
4. Revisit your plan once a year, not once a day.

Sector rotation gets oversold as a magic trick. In practice, defensive names like staples and utilities tend to hold up better when the cycle turns, while cyclicals swing harder in both directions. It's a tilt, not a strategy. Treat it that way.

How do I know which regime I'm in without guessing?

You measure the distance from the most recent high. Down 20% or more, it's a bear. Up and making new highs, it's a bull. Everything in between is a gray zone, and honestly, most of the time we're in the gray zone. The label matters less than your plan.

Should I sell when a bear market starts?

By the time it's confirmed, you've already taken the decline. Selling then locks in the loss and puts you in the position of having to time your way back in, which is the harder half of the trade. For long-horizon money, the record favors staying put. For money you need soon, it shouldn't have been in stocks to begin with.

The part nobody puts in the headline

Every crash feels like it might be the one that doesn't recover. That's not a bug in your psychology. It's how the experience is built. The people who came out ahead over the last several decades mostly weren't smarter than everyone else. They just didn't sell.

Which brings me back to that email from early 2022. I told my friend to do nothing, and I'll be honest, I wasn't certain I was right. I just knew that his plan had been built for exactly this moment, and abandoning it because of a bad quarter was the one move guaranteed to hurt. Whether the next stretch is a bull or a bear, the question you'll face is the same one he did. Not "what's the market doing," but "can I hold still while it does it."