A Bull or a Bear Market? It Doesn’t Matter. (2024)

The headlines and market analyses of the last few weeks, saying that stocks are in a bull market, may be a comfort even if they are potentially misleading.

They are based on the unassailable fact that the S&P 500 has risen more than 20 percent from its last bottom, which occurred on Oct. 12. News that the Federal Reserve expects further interest rate increases this year has weighed on the market. Yet if inflation, which rose at an annual rate of 4 percent in May, drops substantially, the Fed might hold rates steady, or even start to reduce them — and the stock market might well keep rising.

But is this really a bull market? It may ultimately turn out to be one, but right now, there are some big caveats.

First, if a bull market means to you that stocks are trending unequivocally upward, then, no, the bull market label is being misapplied right now. It’s not at all clear what the trend of the market will be for the next month or year. Second, even as a retrospective measurement of how the market has performed, this bull market designation is premature, using a stricter definition, one that seems much more sensible to me, as I’ll explain.

The Popular Definition

A frequently repeated definition — and one that, I think, is too simple and potentially dangerous — is that a bull market is one that has gained 20 percent from its last bottom. (Using the same logic, a bear market is one that has declined 20 percent from its last peak.)

That sounds straightforward. It’s sometimes called an “official” definition, though it’s nothing of the sort.