Bull Markets vs Bear Markets: The Differences Explained
This is one of the great benefits of a market downturn and one of the key differences between bear markets vs bull markets for attentive and astute investors. As for which investing strategies to employ, different sectors tend to outperform over various periods in a bull market. Early on, cyclical sectors like financial stocks and industrial stocks tend to outperform as they are most sensitive to interest rates and economic growth. Let’s take a closer look at some typical hallmarks or signs of bull markets vs bear markets, and what investing strategies tend to be better suited for each one. In addition, investors may benefit from taking a short position in a bear market and profiting from falling prices.
- Worse, a true bull market can reward you for taking on more risk—at first.
- Bullish investors identify securities that are likely to increase in value and direct available funds toward those investments.
- While not everyone is ready to say we’re in a bull market now, financial advisers broadly agree about how to invest during one.
- A bull market occurs when asset prices rise significantly over a sustained period.
- Ongoing discipline with your investing approach helps you avoid slipping into an overly aggressive or speculative strategy.
The term “bull market” is often used in the context of the stock market, but it can be used in any financial market – including Forex, bonds, commodities, real estate, and cryptocurrencies. This term can also be used to refer to a prolonged rise in the value of a specific asset like bitcoin, ether, or BNB or a sector like security tokens or biotech stocks. A bull market is a period of significant growth, and major stock indexes are typically used to measure bull markets, but the term can also refer to the growth of individual securities.
A bull market (aka a bull run) is a long, extended period in the market when overall stock prices are on the rise. Public sentiment is another potential signal of a transition between bull and bear markets, according to Paré. Since 1932, bull markets have lasted an average of nearly 5 years and the S&P 500 sees a gain of 177.8%. The longest bull market started in March 2009, near the end of the Great Recession, and roamed Wall Street for almost 11 years. The S&P 500 entered a bull market on June 8, 2023, after rising 20% from its October 2022 lows.
Bull Market vs. Bear Market in Crypto – What’s the Difference?
This is why it’s important to maintain discipline and keep to your trading strategy, even in the most optimistic periods of a bull market. In bull markets, the earlier you recognise when an asset is going to increase in price, the biggest the potential reward. As we’ll see below, tech stocks are outperforming and financials are lagging. Remember that a https://forexhero.info/ diversified portfolio will probably own all or most of these stocks, but the proportions will likely change over time. Additionally, monitoring the on-chain activity of large holders, or “whales,” can provide insight into market capitalization trends. For example, if whales accumulate a particular cryptocurrency, it may indicate that they’re bullish.
So not being invested in the market means missing out over the long haul. Like a savvy matador, individual investors should keep an eye on the bull’s moves, and adjust accordingly — but always stay focused on their overall strategy and goals. But don’t celebrate quite yet as some stock experts are still mixed on what the rest of the year could look like and are still maintaining pessimistic views.
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That said, a bull market may be defined in many different ways, and experts may disagree about what exactly counts as a bull market. You may see some sources, for example, saying a bull libertex review market is a 20% increase from recent lows while others do not provide an exact threshold. All of this means it may not always be clear in the moment whether we are in a bull market.
After taking a beating during the Great Recession (2007 to 2009), the S&P 500 gained over 400% after a low of 666 points on March 6, 2009. On February 12, 2020, the Dow Jones Industrial Average reached a record high of 29,551 points. The gains for the S&P alone amounted to over $18 trillion on paper, and during the period unemployment was at a 40-year low, at under 4%. Though a charging bull and a hibernating bear are useful images, bear and bull markets are thought to have gotten their names from the way they attack.
A History Of U.S. Bull Markets, 1957 to 2022
Founded in 1993, The Motley Fool is a financial services company dedicated to making the world smarter, happier, and richer. The Motley Fool reaches millions of people every month through our premium investing solutions, free guidance and market analysis on Fool.com, top-rated podcasts, and non-profit The Motley Fool Foundation. By employing a dollar-cost averaging strategy of investing a fixed dollar amount over regular periods, investors can lower their average buy-in cost. In fact, it often becomes more likely that the market becomes close to an inflection point when everyone recognizes a bull market. There can be a danger that if sentiment turns, everyone could rush for the exits and try to sell. If traders are feeling optimistic about stocks, or any other asset, they’re more likely to trade them.
How long the average bull market lasts
Rather, there are likely to be shorter periods of time in which small dips occur as well, even as the general trend continues upward. Because prices of securities rise and fall essentially continuously during trading, the term “bull market” is typically reserved for extended periods in which a large portion of security prices are rising. During a bullish market, investors will buy assets with the expectation of selling them later once the prices have increased. When investors are optimistic about the state of the market, confident that the upward trend will continue, and expectant of investment growth, the market in question would be known as being “bullish”. Prior to the latest one, there was a lengthy bull market that lasted from 2002 until the late-2007 bear market that coincided with the financial crisis.
Even if it hold rates steady at its next meeting, which would be the first time that’s happened in more than a year, the expectation among traders is for the Fed to resume hiking in July. The hope is that will ultimately be the last rate hike, but persistent inflation could upend that. The S&P 500 is now in what Wall Street refers to as a bull market, meaning the index has risen 20% or more from its most recent low.
One says a bull market is confirmed when a major index like the S&P 500 climbs 20 percent above its most recent low. By that standard, the bull market was confirmed in June, when the S&P 500 closed 20 percent above its October 2022 low. Instead, they’re now betting that a drop in rates will help expand corporate profits, while the economy stays on a relatively solid footing. Sometimes stocks go up because other economic indicators are heading in the same direction. Also think through how the prospective stock might behave in a weaker market. And, make sure you have a defined exit plan for your more speculative assets.
For the record, the S&P 500’s longest bull market in history began in March 2009 and ended abruptly in March 2020, clobbered by coronavirus fears. The ensuing bear market cut fast and deep, but bottomed out in late March. About a month after its nadir, the market returned to bull-market territory and just kept chugging along. For example, traders could decide to invest a fixed amount, such as $100, on the first day of every month, regardless of whether prices are high or low.
Bear investors believe that the value of a specific security or industry is likely to decline in the future. A bear market occurs when the market experiences prolong price declines—typically when securities prices fall by 20% or more and there is negative investor sentiment. When looking at the differences between bear markets vs bull markets, the former is often seen by observers as a decline of 20% from a previous high. It’s not uncommon for this to happen during or right before recessions or periods of high unemployment.
Ongoing discipline with your investing approach helps you avoid slipping into an overly aggressive or speculative strategy. You can position yourself to remain disciplined by documenting your investing parameters and process. Those rising stock values can affect your net worth directly and quantifiably.
Most commonly this is in reference to the stock market, but it can apply to anything that is traded in a virtual market space, including bonds, real estate, and even currencies. Always be on the lookout for early signs that a bull run may be coming to an end. Yet the risks only became apparent to most investors in August 2007. Another famous example of a bull market was the extreme run-up in U.S. housing prices in the mid-2000s.
