What is a bull market and a bear market?

A bull market and a bear market describe the two broad moods of the stock market. A bull market is a sustained period in which prices are generally rising and investor confidence is high. A bear market is the opposite — a prolonged decline, conventionally defined as a fall of about 20% or more from a recent peak, accompanied by pessimism and caution.

The animal imagery is often explained by how each attacks: a bull thrusts its horns upward, while a bear swipes its paws downward. Whatever the origin, "bullish" has come to mean optimistic and "bearish" pessimistic, whether about the whole market or a single stock.

In a bull market, rising company earnings, a stable or improving economy, falling interest rates, or strong foreign and local inflows tend to lift the KSE-100. Optimism feeds on itself: gains attract more buyers, IPOs become easier, and risk appetite grows. Bull runs can last for years, though they include plenty of short pullbacks along the way.

A bear market usually sets in when the outlook darkens — slowing growth, rising inflation or interest rates, political or currency stress, or external shocks. Selling pressure builds, valuations compress, and trading volumes may thin out as investors retreat to cash or safer assets. Fear can overshoot just as optimism does, sometimes pushing good companies well below their intrinsic value.

It helps to distinguish a bear market from a correction, which is a shorter, milder drop of around 10%, and from ordinary day-to-day volatility. Not every dip is a bear market, and not every rally is a new bull market.

For investors, the labels are a reminder that markets move in cycles. Bull markets reward staying invested but can breed complacency and overpriced shares; bear markets are painful but historically have created the best long-term buying opportunities for patient investors. Because no one can reliably call the exact top or bottom, many investors focus on a disciplined plan — diversifying, investing regularly, and judging companies on fundamentals — rather than trying to time the turn.

The PSX, like every market, has cycled through both phases many times. Recognising which environment you are in helps set realistic expectations, but it should inform your strategy rather than dictate panic-buying or panic-selling.