My recent discussion on why March 2020 was a "correction" and not a "bear market" sparked much debate over the somewhat arbitrary 20% rule.
"Price is nothing more than a reflection of the 'psychology' of market participants. A potential mistake in evaluating 'bull' or 'bear' markets is using a '20% advance or decline' to distinguish between them."
Wall Street loves to label stuff. When markets are rising, it's a "bull market." Conversely, falling prices are a "bear market."
Interestingly, while there are some "rules of thumb" for falling prices such as:
A "correction" gets defined as a decline of more than 10% in the market.
A "bear market" is a decline of more than 20%.
There are no such definitions for rising prices. Instead, rising prices are always "bullish."
It's all a bit arbitrary and rather pointless.
The Reason We Invest
It is essential to understand what a "bull" or "bear" market is as investors.
A "bull market" is when prices are generally rising over an extended period.
A "bear market" is when prices are generally falling over an extended period.
Here is another significant definition for you.