Market trend

 ( Financial Markets ) 

In a secular bull market, the prevailing trend is "bullish" or upward-moving. The United States stock market was described as being in a secular bull market from about 1983 to 2000 (or 2007), with brief upsets including Black Monday and the Stock market downturn of 2002, triggered by the crash of the dot-com bubble. Another example is the 2000s commodities boom.

In a secular bear market, the prevailing trend is "bearish" or downward-moving. An example of a secular bear market occurred in gold from January 1980 to June 1999, culminating with the Brown Bottom. During this period, the market price of gold fell from a high of $850/oz ($30/g) to a low of $253/oz ($9/g). The stock market was also described as being in a secular bear market from 1929 to 1949.

Generally, bull markets begin when stocks rise 20% from their low and end when stocks experience a 20% drawdown. However, some analysts suggest a bull market cannot happen within a bear market.

An analysis of Morningstar, Inc. stock market data from 1926 to 2014 revealed that, on average, a typical bull market lasted 8.5 years with a cumulative total return averaging 458%. Additionally, annualized gains for bull markets ranged from 14.9% to 34.1%.

India's Bombay Stock Exchange Index, BSE SENSEX, experienced a major bull market trend from April 2003 to January 2008. It increased from 2,900 points to 21,000 points, representing a more than 600% return in 5 years.

Notable bull markets characterized the 1925–1929, 1953–1957, and 1993–1997 periods when the U.S. and many other stock markets experienced significant growth. While the first period ended abruptly with the start of the Great Depression, the end of the later time periods were mostly periods of soft landing, which became large bear markets. (see: Recession of 1960–61 and the dot-com bubble in 2000–2001)

A decline of 10% to 20% is classified as a correction.

Bear territory always precedes a bear market. Typically, as a market enters bear territory, there are indicators other than a correction. The Cboe Volatility Index (VIX), a key measure of market volatility, increases, indicating heightened investor anxiety. Additionally, consumer sentiment drops, with expectations for unemployment rising and economic outlooks declining. Most recently (as of April 12, 2025), in April 2025, the United States stock market entered bear territory. The S&P 500 Index declined over 20% from its recent peak, meeting the technical definition of entering bear territory. This downturn is primarily attributed to escalating trade tensions and tariff policies under the Trump administration, which have led to significant market volatility and investor uncertainty. Ultimately, when a market enters bear territory, it almost always leads that stock market into a bear market.

Bear markets conclude when stocks recover, reaching new highs. The bear market is then assessed retrospectively from the recent highs to the lowest closing price, and its recovery period spans from the lowest closing price to the attainment of new highs. Another commonly accepted indicator of the end of a bear market is indices gaining 20% or more from their low.

From 1926 to 2014, the average duration of a bear market was 13 months, accompanied by an average cumulative loss of 30%. Annualized declines for bear markets ranged from −19.7% to −47%.

• The Wall Street Crash of 1929, which erased 89% (from 386 to 40) of the Dow Jones Industrial Average's market capitalization by July 1932, marking the start of the Great Depression. After regaining nearly 50% of its losses, a longer bear market from 1937 to 1942 occurred in which the market was again cut in half.
• A long-term bear market occurred from about 1973 to 1982, encompassing the 1970s energy crisis and the high unemployment of the early 1980s.
• A bear market occurred in India following the 1992 Indian stock market scam committed by Harshad Mehta.
• The Stock market downturn of 2002.
• Due to the 2008 financial crisis, a bear market occurred between October 2007 and March 2009.
• The 2015 Chinese stock market crash.
• In early 2020, the COVID-19 pandemic caused multiple stock market crashes, leading to bear markets across the world.
• In 2022, concerns over an inflation surge and potential rises of the federal funds rate caused a bear market.

According to William O'Neil, since the 1950s, a market top is characterized by three to five distribution days in a major stock market index occurring within a relatively short period of time. Distribution is identified as a decline in price with higher volume than the preceding session.

The peak of the U.S. stock market before the 2008 financial crisis occurred on October 9, 2007. The S&P 500 closed at 1,565 and the NASDAQ at 2,861.50.

Identifying a market bottom, often referred to as 'bottom picking,' is a challenging task, as it's difficult to recognize before it passes. The upturn following a decline may be short-lived, and prices might resume their descent, resulting in a loss for the investor who purchased stocks during a misperceived or 'false' market bottom.

Baron Rothschild is often quoted as advising that the best time to buy is when there is 'blood in the streets'—that is, when the markets have fallen drastically and investor sentiment is extremely negative.

• The Dow Jones Industrial Average hit a bottom at 1,738.74 on October 19, 1987, following a decline from 2,722.41 on August 25, 1987. This day is commonly referred to as Black Monday (chart).
• A bottom of 7,286.27 was reached on the DJIA on October 9, 2002, following a decline from 11,722.98 on January 14, 2000. This decline included an intermediate bottom of 8,235.81 on September 21, 2001 (a 14% change from September 10), leading to an intermediate top of 10,635.25 on March 19, 2002 (chart). Meanwhile, the "tech-heavy" Nasdaq experienced a more precipitous fall, declining 79% from its peak of 5,132 on March 10, 2000, to its bottom of 1,108 on October 10, 2002.
• A bottom of 6,440.08 (DJIA) on 9 March 2009 was reached after a decline associated with the subprime mortgage crisis starting at 14164.41 on 9 October 2007 (chart).

Supply and demand dynamics vary as investors attempt to reallocate their investments between asset types. For instance, investors may seek to move funds from government bonds to 'tech' stocks, but the success of this shift depends on finding buyers for the they are selling. Conversely, they might aim to move funds from 'tech' stocks to government bonds at another time. In each case, these actions influence the prices of both asset types.

Ideally, investors aim to use market timing to buy low and sell high, but in practice, they may end up buying high and selling low. Contrarian investors and traders employ a strategy of 'fading' investors' actions—buying when others are selling and selling when others are buying. A period when most investors are selling stocks is known as distribution, while a period when most investors are buying stocks is known as accumulation.

"According to standard theory, a decrease in price typically leads to less supply and more demand, while an increase in price has the opposite effect. While this principle holds true for many assets, it often operates in reverse for stocks due to the common mistake made by investors—buying high in a state of euphoria and selling low in a state of fear or panic, driven by the herding instinct. In cases where an increase in price leads to an increase in demand, or a decrease in price leads to an increase in supply, the expected negative feedback loop is disrupted, resulting in price instability.