An index falls from 100 to 80, then climbs to 96. A headline announces a new bull market. You look at the old high and see a market that is still down.
The headline starts its count at 80. Your comparison starts at 100. The climb looks different because the starting point moved.
These are closing levels of a made-up price index, with its recent peak set to 100. The puzzle is in the starting point, not the prices.
Start with the reference point
A market correction means a fall of about 10% to under 20% from a recent peak. At 20% or more, the usual label is bear market. These thresholds are conventions: a fall of 19.9% and one of 20% get different names despite being almost the same size.
A market pullback is a looser term for a decline, often a smaller one, without an official cutoff. These names describe the size of a fall, not whether stocks are now cheap.
A bull market is a sustained rise in market prices. Headlines often mark one at 20% above a low, though definitions vary. A bull market can begin well below the previous high.
Name the index before applying the label: one basket can cross a threshold while another stays short of it. Its result need not match your holdings. Your purchase price affects your own gain or loss; it does not date a market cycle.
A rebound can leave a loss behind
From 100 to 90, the index loses 10 out of 100 points: 10%. At 80, it has lost 20 out of 100: 20%. Both declines use the peak of 100 as their starting point.
For the rebound, start at 80. The denominator, the number you divide by, changes with the comparison.
The rise to 96 is (96 − 80) / 80 = 16 / 80 = 0.20, or 20%. The index gained 16 points after losing 20. Equal percentages did not undo one another.
The line turns upward, but stops short of the old peak.
At 96, the index is still 4% below 100: (96 − 100) / 100 = −4%. The math of drawdowns explains the gain needed to regain a peak and the time spent below it.
A bear-market rally is a temporary rise within a longer decline. Suppose the index later falls below 80. Its climb to 96 would still have happened; the bull headline would not have made 80 a lasting bottom. Turning a label into a buy or sell signal adds a market-timing claim that the percentage alone cannot support.
Optional: what history can tell you
Capital Group's frequency table reports that S&P 500 declines of 10% or more averaged about one every 18 months during 1954–2024. That includes declines that became bears. To separate episodes, its counting rule treats a decline as over once half the lost value has been recovered.
Its separate duration chart covers 1949 through December 31, 2024. Eleven bear periods averaged about 12 months; completed bull periods averaged about 67 months. The much longer bull bar leaves out the period that began in 2022: it was still running at the cutoff.
In that study, a bear runs from a peak to the low ending a price decline of at least 20%. The periods between bears count as bulls. Its bull clock starts at the low identified afterward; a 20% rebound is a later milestone. The history chart uses hindsight that a live headline does not have.
An average is not an appointment. A year without a decline does not make one due; a year inside a bear does not mean it has used up its time. These are average lengths of price phases in one US sample, not waits to regain the old high. Market history follows the individual episodes behind those averages.
What the labels cannot tell you
Bulls and bears describe market prices; recessions describe broad economic downturns. Neither market label tells you how an individual business is doing.
A long holding period can contain several uncomfortable declines. Neither US history nor extra time guarantees recovery for every stock or national market. The date you need your money still matters, whatever animal is in the headline.
To translate a headline, look for three things:
- The market and dates. Which index moved, and over what period?
- The starting point. How far did it move from which peak or low?
- The price measure. Closing levels can differ from intraday levels reached during trading. A total-return index includes reinvested dividends; a price index does not.
For our example: "The index closed at 96, up 20% from its low of 80 and still 4% below its old high of 100." A real headline also needs the index's name and the dates. That translation explains the observed move; the next direction and the date of full recovery remain unknown.
If the headline arrives inside an unsolicited investment pitch, check who is asking for your money. A familiar market label does not verify the sender.
In short
- Corrections and bears measure losses from a peak; a common bull headline measures gains from a low.
- The 10% and 20% thresholds give price moves names, not instructions.
- A 20% rebound can leave an index below its previous high because it starts from a smaller base.
- Historical averages describe a sample, not how long a phase has left.
- A market label describes what prices have done; it cannot tell you what comes next.