What is a bull market vs bear market? What to know as S&P 500 changes

In 2023, the Magnificent 7 stocks logged an impressive average return of 111%, compared to a 24% return for the broader S&P 500. As much as the “line of bull” story rings true, the most widely accepted theory is that the actions of bulls and bears, when attacking an opponent, reflect market movements. After taking a beating during the Great Recession (2007 to 2009), the S&P 500 gained over 400% after reaching a low of roughly 666 points on March 6, 2009.

Investing in a bull market

  1. Add growth stocks to your portfolio and then hold them for the long term.
  2. Perhaps the most aggressive way of attempting to capitalize on a bull market is the process known as full swing trading.
  3. The bull market ended in early October 2007 as stocks peaked, marking the start of a recession.
  4. “My advice to people who have been investing in the market is to stay with it,” he told Bloomberg on Thursday.
  5. People can be bullish or bearish on any investment opportunity, including real estate and commodities, such as soybeans, crude oil, or even peanuts.

But during a bear market, your $100 will buy more, since prices are going down. In general, a bull turns into a bear when stock prices fall by 20% after a recent market high. In addition, investors are typically extremely confident during a bull market. The demand for stocks is strong, which, coupled with the optimism and positive tones in the economy, helps raise share prices even higher. Bear investors believe that the value of a specific security or industry is likely to decline in the future.

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How often do bull markets happen and how long do they last?

BTC price hit an all-time high in October 2021, when Bitcoin crossed the $66,000 mark, with Ethereum above $4,700. As crypto is extremely volatile, the holders have to keep an eye on the current market conditions. Stock markets were soaring between August 1982 and 1987, with the S&P increasing by +219%.

Timing: Bear Vs. Bull Market

Some of those losses may be temporary, but a downturn could also permanently change the outlook for smaller, less established companies. The good news is that the past data indicates the market has collectively had more good years than bad years. The length of the average bear market, when an index like the S&P 500 loses 20% or more of its value, is just under a year. When most people think of a bull, they probably visualize a strong animal charging forward. Metaphorically, this is how the market tends to perform when the economy is doing well and unemployment is low. No entity calls a bull market in the way a nonprofit group determines a recession.

Furthermore, top-line growth should usually increase in line with the GDP and is, therefore, a good measure to reflect demand. Conversely, business top-line growth shows the investment potential for investors. Bull markets can last for years, but they must eventually come to an end. When the stock market experiences a prolonged downturn, it’s called a bear market. One common method is the buy and hold technique, where an investor buys securities when they expect a bull run to take effect, and sit back while the value of their assets increases. CrowdStrike offers more than two dozen cybersecurity products through a single platform.

Erika Rasure is globally-recognized as a leading consumer economics subject matter expert, researcher, and educator. She is a financial therapist and transformational coach, with a special interest in helping women learn how to invest. Wayne Duggan has a decade of experience covering breaking market news and providing analysis and commentary related to popular stocks.

If there’s a recession, stocks will probably head south again, Zaccarelli says. Also, banks have pulled back lending because of deposit runs that led to the collapse of several regional banks. Many economists still forecast a mild recession later this year because of the stricter lending, the delayed effects of the rate increases and the depletion of consumers’ excess cash. It’s hard to say if this bull market has legs or will soon peter out.

In this post, we will define a bull market and explain what bullish investing behavior means. We will also look at different types of bull markets, their key indicators, and their characteristics. In addition, the main differences between bull and bear markets, define secular and cyclical bull markets, and discuss some investment strategies prevalent in a bull market. If we are in the early stages of a new bull market, now’s the time to prepare. Follow the four strategies below to capitalize on rising stock prices. A bull market occurs when financial markets rise for a period of time and this can last anywhere from months to years.

Investor confidence will also tend to climb throughout a bull market period. The overall demand for stocks will be positive, along with the overall tone of the market. In addition, there will be a general increase in the amount of IPO activity during bull markets.

Remember that over the long term, the stock market has always posted a positive return. A market is usually not considered a true “bear” market unless it has fallen 20% or more from recent highs. This results in a downward trend that investors believe will continue; this belief, in turn, perpetuates the downward spiral. During a bear market, the economy slows down and unemployment rises as companies begin laying off workers. For example, stocks entered a bull market in March 2009, amid the Great Recession, and lasted until COVID-19 effectively shut down the world economy in March 2020.

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The period was characterized by historically low interest rates, highly leveraged balance sheets and subprime mortgage lending. The Dow Jones Industrial Average suffered its worst percentage loss in any week since the Great Depression when it reopened following the September 11 terrorist attacks in 2001. However, the stock market quickly recovered its losses and proceeded to climb a “wall of worry” and gain more than 21% over the next three and a half months. Inflation surged above 10% in the late 1970s, eventually peaking at more than 14% in 1980. Fed Chair Paul Volcker was forced to raise the federal funds rate to a peak of 19.3% in 1980, conditions the bull market simply couldn’t survive.

Opposite of a bull market, a bear market is when the market goes down and the value of stocks and bonds decrease. Investors tend to lose value in their portfolio and this also translates to a lack of confidence in the market. Though a bull market is often used to describe stock markets, any asset class can have one, including bonds, real estate, commodities, and foreign currencies. While you may be tempted to sell off your investments to avoid losing more money during a bear market, doing so locks in the losses you’ve experienced.

The longest bull market in the history of the S&P 500 index lasted from March 2009 to February 2020 and saw the index gain over 300%. This bull market was characterized by strong earnings growth, low interest rates, and investor optimism. Despite its length, the bull market was relatively volatile, with several corrections and pullbacks along the way.

As noted above, the longest bull market in history ran for 11 years, from 2009 to 2020. Every investor has unique circumstances, and they can benefit greatly from evaluating their risk tolerance, goals, and investment horizon before making any specific moves. When a Bull market comes to an end, a bear market follows, beaxy exchange review which is often characterized by equities dropping by 20% or more from their recent high. Dwindling market confidence, declining corporate profitability, and recessions are all common occurrences during Bear markets. During the last crypto bull run in 2020, prices of Bitcoin reached $20,000 before plummeting.

When you view historical charts that measure the rise and fall of the stock market, you’ll see clear rising slopes over time that indicate when there was likely a bull market. You’ll also see the percentage growth of stocks and bonds during that time. While bull markets don’t always necessarily mean that there won’t be slight dips in the market, it does indicate steady financial growth as the value of stocks and bonds tend to trend upward overall. While bull markets generally don’t cause people too much stress, bear markets often inspire anxiety and uncertainty.

Bull markets tend to last longer than bear markets and deliver returns that more than offset the losses in bear markets. So most investors should stick to a long-term investing strategy, and avoid trying to outguess the market as a short-term trader – or risk severely underperforming. If you are investing for the long term (and that is what investing in a bull market is all about) buying and holding stocks is a great way to build wealth. Because bull markets last longer and grow more historically than bear markets, your yearly average returns in the stock market will generally outpace inflation and grow your assets. A bull market is an extended period of time when stock prices rise and investors are optimistic. Bull markets can last for months or even years, and stocks tend to outperform other investments like bonds.

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