The definition and its origins
The 20% threshold is a convention, not a law — markets don’t know about it. A 19.9% decline is not officially a bear market; a 20.1% one is. The terminology is thought to derive from the way a bear attacks: swiping its paws downward, symbolising falling prices. A bull market is the opposite — prices trending upward (either sustained gains of 20% from a trough, or simply an extended period of rising prices). A correction, by convention, is a decline of 10–19.9%.
What causes bear markets
Bear markets typically arrive via one of a few routes: economic recession (falling corporate earnings reduce the present value of future profits); monetary tightening (rising interest rates make risk-free assets relatively more attractive, compressing equity valuations); credit crises (financial system stress, as in 2008); geopolitical shocks; or simply overvaluation giving way to mean reversion. Sometimes multiple causes combine. The COVID crash of 2020 was extraordinary in its severity (−34%) and speed but also in its recovery: markets reclaimed their pre-crash highs within five months.
How long they last
The average US bear market since 1928 has lasted approximately 9.6 months and seen the S&P 500 decline by an average of 36%. The longest was the Great Depression era (nearly three years). The shortest on record is the COVID crash (33 days from peak to trough). Critically, every single bear market in US stock market history has eventually ended in a recovery that surpassed the prior peak — though this has taken anywhere from months to several years.
“The stock market is a device for transferring money from the impatient to the patient.” — Warren Buffett
What this means for you
The evidence strongly suggests that long-term investors should not sell during bear markets. Those who sold at the March 2009 bottom missed the 400%+ recovery over the following decade. The correct response to a bear market if you are investing for retirement in 20+ years is usually to continue your regular contributions — you are now buying the same assets at a 20–50% discount. If you are near or in retirement and genuinely need the money, a proper asset allocation with bonds and cash as ballast means you should never be forced to sell equities at a trough. Bear markets are the tuition fee for long-run equity returns.