Yahoo Finance Live anchor Jared Blikre explains what bear and bull markets are, when and where they can be seen in stock market trends, and how they could materialize in a recession, all in this week's Yahoo U.

Video Transcript

JEFFREY GUNDLACH: I think the stock market is in a protracted bear market. It started, really, in the fourth quarter of 2021. Finally, the NASDAQ gave it up, and then, finally, the high fliers in the NASDAQ, and we've been talking about this, that this was going to happen. Because the difference between the S&P 500 and the S&P 495 was pretty remarkable. I mean, the equal weighted S&P did almost nothing, and the actual S&P was going straight up. So that market rolled over, and we've been in sort of a negative mood all that time.

JARED BLIKRE: Hold on, guys. Let's back up a second, because what exactly is a bear market? I'm Jared Blikre, and it's time for this week's "Yahoo! U." All right, we've got to get back to definitions, because as it turns out, there is no standard definition for a bull market. But I have one right here.

Here's the common definition. First, we'll start off with the bear. When a stock index drops 20% or more from a closing high to a closing low, pretty easy to imagine here, and I'll you a couple of examples in a second. But then we have the converse, the inverse. What is a bull market? Another common definition, but not the only one. When an index that's already in a bear market either, A, rallies to a record high, or here's another one, B, rallies 20% off the bear market low.

So let's give a couple of examples here. Here is the Dow. Now, at the beginning of 2022, this chart goes back a little bit farther than that. It peaked. This is the all time high in the Dow, and now, we had the low, the most recent low at the beginning of October here. So it fell about 22%, and then it rose just over 20%.

So technically, it is in a bull market right now. Let's go on to the NASDAQ. Very similar situation, we got a low in June or July, last year, after falling about 33%, so a bit more. Then it rallied 23%, but guess what? Or excuse me, dropped to a new low, so that was negated.

It was kind of a false signal right there. Now, we are up about 19% off these highs, so technically still in a bear market for the NASDAQ. S&P 500, a little bit more straightforward. It also peaked at the beginning of 2022, bottomed around October, and now, it is up 16% off those lows, 16.5%, so not quite yet the bull market just yet.

Now, it's important to consider what's happening with the recession talk. When we talk about the soft landing versus hard landing versus no landing, we're talking about recession, and when we have a recession, bear markets tend to be longer, more protracted, and also, deeper. This shows us the S&P 500 declines around recessions since 1947, so basically, the post-war period.