Bear Vs Bull Market: Whats The Difference?

Seeing the value of your portfolio go down can induce anxiety, and investors can panic-sell at the bottom, sometimes just before a recovery. Make sure your decisions during bear markets are based on your understanding of your investments rather than on your fear that they will never recover. Because prices are trending upward, bull markets typically reflect an overall sense of optimism and confidence in the stock market. More people tend to invest in the market during bull periods to potentially profit. That increased demand for securities increases their price, which can then spur more even demand as even more people want in, sending stock prices—and gains—higher. If you are in your 20s, 30s or even your 40s and are investing for a far-off goal, like retirement, strive to hold onto your stocks and keep investing during any market.

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1. It’s not uncommon for analysts and observers to call a “bull market” when prices rise 20% or more from a previous low.
2. It’s impossible to know exactly when a bull market will start, but one way for investors to prepare for the next one is to keep buying high-quality stocks, even when they are falling.
3. A bear market occurs when prices are falling, or when they’re expected to decrease.
4. According to data from the University of Idaho, a bear market lasts an average of 1.3 years.

Working with a financial advisor to help you develop an investing strategy that fits your situation can help you to stay on track. The term bull market is applied to a market (especially a stock market) in which prices are, on average, rising. At any given time, the market is usually described as one or the other—with bull and bear markets alternating as part of an ongoing cycle. Since WWII, bear markets have taken 13 months on average to go from peak to trough and 27 months to get back to breakeven. The longest bear market in history ended in March 1942, lasted 61 months, and cut the S&P 500 Index by 61%. By and large, investors look for a 20% gain from a low point and steady gains over at least a six-month period to understand when a bear market has ended.

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Generally, a bull market occurs when there is a rise of 20% or more in a broad market index over at least a two-month period. When stocks are rising during a bull market, it usually indicates a time of economic expansion, that the economy is strong and investors are confident. Since 1932, the average length of a bull market has remained just under five years. A bear market is defined as starting when stock prices broadly decline by 20% and keep trending lower.

Depending upon the depth and breadth of the bear market, there can certainly be some bargains to be had. The difference between a bear market and a bull market is the direction of prices and the general success or health of the market. Simply put, it’s a bull market when prices are going up, and it’s a bear market when prices are going down. Here’s what you need to know about bull and bear markets, including key differences between them. An investor may also turn to defensive stocks, whose performance is only minimally impacted by changing trends in the market.

In such times, investors often have faith that the uptrend will continue over the long term. In this scenario, the country’s economy is typically strong and employment levels are high. Growth stocks in bull markets tend to perform well, while value stocks are usually better buys in bear markets. Value stocks are generally less popular in bull markets based on the perception that, when the economy is growing, “undervalued” stocks must be cheap for a reason. Rising GDP denotes a bull market, while falling GDP correlates with bear markets. GDP increases when companies’ revenues are increasing and employee pay is rising, which enables increased consumer spending.

A potential downfall for investors in a bull market is a reluctance to sell and take profits. Especially in a prolonged bull market, investors can forget the pain they experienced in the last bear market and feel like the bull market will never end. This is perhaps the biggest risk that an investor might face in a bull market. Usually, a bull market happens when the economy is strong or getting stronger.

bear vs. bull market

Then you can safely withdraw the same based amount each year, adjusted for inflation, without running out of money for at least what does it mean to be bullish or bearish in crypto 30 years and in some cases up to 50. Notably, the research that established the 4% Rule found this to be true through both bull and bear markets. For investors who are nearing or entering retirement at the start of a bear market, a severe downturn can put a real crimp in their financial plans for retirement. Whether it’s better to buy stocks in a bull vs. bear market isn’t a simple question; every market is unique, as are each individual’s circumstances. Investing in any kind of market comes with risk, including the risk that you could lose money, so it’s important to understand best practices for investing in both bull and bear market phases.

A bear market may indicate — but not guarantee — a possible recession since bear markets often go hand in hand with recessions. No one can predict when markets will rise or fall, but it’s good to be aware of the differences between bull markets vs bear markets. The 4% Rule states that you can safely withdraw 4% of your retirement portfolio the first year you retire.

It’s not uncommon for analysts and observers to call a “bull market” when prices rise 20% or more from a previous low. However, there are many definitions of a bull market, with some saying one cannot be confirmed until the previous high has been taken out. Indeed, a bull market was stock market crashes declared in early January 2024, when the S&P 500 closed above its prior record set almost exactly two years before.

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It’s a natural instinct to want to immediately respond to a loss in value, so skirt around that knee-jerk reaction by checking up on your investments as little as possible. Bull markets are often categorized as secular (indicating a period of growth lasting more than five years) or cyclical (indicating a shorter-term period of growth). Views expressed are as of the date indicated, based on the information available at that time, and may change based on market or other conditions. Unless otherwise noted, the opinions provided are those of the speaker or author and not necessarily those of Fidelity Investments or its affiliates. For example, in 2020, the Dow Jones dropped more than 30% of its value as the first wave of the COVID-19 pandemic struck.

That said, investing in a bear market can still be profitable in the long-run. A bull market, otherwise known as a bull run, is an extended period during which stock prices increase (usually 20%) compared to their most recent low. As the market continuously grows, investors become more optimistic and buy more shares. Bear markets can certainly spark anxiety among investors as no one likes to experience losses. Some of the best strategies investors can employ to protect their portfolios during times of uncertainty are with defensive plays, like those found in utilities, consumer staples and healthcare stocks. While bear markets can be scary, they are a natural part of the economic cycle and often lead to even stronger market returns.

Both a bull and a bear market represent a significant percentage movement in the market. Both cryptocurrency exchange for bitcoin, ethereum and altcoins are often tied to the direction of the economy and can be symptomatic of changes in various economic factors. Stock markets are volatile and can fluctuate significantly in response to company, industry, political, regulatory, market, or economic developments. Recessions are formally declared when GDP decreases for two consecutive quarters, while depressions occur when GDP decreases by 10% or more and the downturn lasts for at least two years. Profit and prosper with the best of Kiplinger’s advice on investing, taxes, retirement, personal finance and much more. That way, when markets rebound, as they always do, the investor does not have to “time the market” or find an optimal point in which to jump in.

Whether or not there is going to be a bull market or a bear market can only be determined over a longer time period. In other words, many investors wish to buy securities, but few are willing to sell them. As a result, share prices will rise as investors compete to obtain available equity. Although the direction of stock prices marks a bull market or bear market condition, there are some accompanying characteristics that investors should be aware of. It is generally better to buy stocks and other investable securities during a bull market since they pose less risk and have a better chance of being profitable.