Bull vs Bear Overview, Market Phases, and Factors

While some expect an investment in Deere would bear fruit, others are more skeptical about its prospects from here. To help make better sense of the different perspectives, two fool.com contributors weigh in on both sides of the argument. Investors switch to various modes on the basis of a number of factors such as global economic concerns, the financial performance of the business entity, national economic data, etc. The answer is six major ones in the FTSE All Share index, according to investment manager Vanguard. These included the oil crisis (1972 to 1974), Black Monday (1987), the dot.com ‘bubble’ (2000 to 2003), the global financial crisis (2007 to 2009) and the Covid-19 pandemic (2020).

Those investors who expect the prices to fall are called bears, and the sentiment is known as bearish. Those investors who expect the prices to rise are called bulls, and the sentiment is known as bullish. Avoiding knee-jerk investing decisions and maintaining a diversified portfolio should help investors to weather the downturn and be well-positioned for the next bull market. In addition to stock markets as a whole, a bear market can also apply to individual shares or other assets such as commodities. Most experts agree that a bear market is one in which securities prices have fallen 20% from recent highs, if not more, spawning widespread pessimism from investors.

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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. Ideally, as investors see what appears to be the start of a bull market, they might buy stocks, stock mutual funds, and ETFs. As the bull market surges higher, they might consider selling some of their equity holdings. At the very least, they should continue with their normal rebalancing regimen. While the terms are relatively simple to understand, the impact either a bull or bear market can have on your portfolio and wealth is undeniable.

You see more and more people thinking, “Oh yeah let’s put money into the market because it’s going up." We’re really excited about buying when there’s a lot of fear and we’re really excited about selling when there’s a lot of greed in the stock market. I’m going to tell you about how to take advantage of a bull and bear market.

Approximately 58% of American adults invest in the stock market, and some beginners may wonder how bear and bull markets differ. Stash does not represent in any manner that the circumstances described herein will result in any particular outcome. While the data and analysis Stash uses from third party sources is believed to be reliable, Stash does not guarantee the accuracy of such information.

  • By following trends, traders can take a more systematic approach, often with the help of technical analysis and trend following indicators like moving averages (MA).
  • Additionally, bull markets can correlate with a growing economy and high employment rates.
  • Since 1932, the average length of a bull market has remained just under four years.
  • While the terms are relatively simple to understand, the impact either a bull or bear market can have on your portfolio and wealth is undeniable.
  • In a bear market, many stocks will fall in value and it can be hard to find those that are truly undervalued.

According to the US Securities and Exchange Commission (SEC), a bull market is defined as a time when stock prices are rising and market sentiment is optimistic. 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.

Each has its own risks and rewards, so it's important to do your research before investing. If a trader sells an asset when it is already undervalued, they may end up losing money even if the price rises. We encourage you to always conduct your own due diligence before trading or investing, such as looking at fundamental and technical analysis, latest news and analyst commentary.

CFI is the official provider of the Commercial Banking & Credit Analyst (CBCA)™ certification program, designed to transform anyone into a world-class financial analyst. Of course, the offers on our platform don't represent all financial products out there, but our goal is to show you as many great options as we can. Investments are not FDIC-insured, nor are they deposits of or guaranteed by a bank or any other entity, so they may lose value. Four figures can produce some great returns if invested in the right places. Her 15-year business and finance journalism stint has led her to report, write, edit and lead teams covering public investing, private investing and personal investing both in India and overseas.

Are we in a bull or bear market in 2022?

To avoid reacting to market fluctuations, refrain from looking at your portfolio often. 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. metatrader web 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. Market timing is notoriously difficult, and you never know when the market is going to hit its bottom.

Bull vs. bear markets: Knowing the difference can make you a better investor

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. That being said, a robust economy—one with low unemployment, rsi divergence indicator increasing wages, healthy levels of consumer spending and production, and moderate inflation—tends to coincide with a bull market. But it’s difficult to determine if the economic benefits are the reason for or the result of the bull market. A good economy can drive investments in the stock market, which in turn can boost the economy.

What is a bull market? Key characteristics

He and his wife, Melissa, share a passion for horses, polo, and eventing. Phil's goal is to help you learn how to invest and achieve financial independence. Phil Town is an investment advisor, hedge fund manager, 3x NY Times Best-Selling Author, ex-Grand Canyon river guide, and former Lieutenant in the US Army Special Forces.

So, in that sense, markets can charge higher, wildly, and with great power, just like a bull. But declining markets can seem like a ransacking bear on the loose – they destroy everything and make people lose confidence. Big market swings in either direction can feel overwhelming, especially when you see the effect they have on your money. But crafting and adhering to a clear long-term investment strategy could help you ride out whichever way the market’s going. Once they no longer have an active income stream, many people shift their investing strategies to preservation instead of growth.

What Do You Mean by Bulls and Bears?

This is observed when we are investing in direct equity while choosing a stock. In a bearish trend there could be signs of bullish phases and vice versa. In the Graph 1 given below, the factors that have led to the bull and bear phases in the last 22 years from January 2000 till May 2022 have been highlighted.

As of June 2022, the S&P 500 was considered by investing experts to be in a bear market, with the value of the stocks it includes having fallen 22.2% below its record high set earlier in the year. While the duration of a bear market is difficult to predict, the S&P 500 has regained and exceeded its value after every bear market in the past. Many experts recommend that investors hold onto their stocks and ride the macro trading floor out the market dip. In a bear market, many stocks will fall in value and it can be hard to find those that are truly undervalued. Value investors need to be patient and have a long-term horizon in mind to succeed in a bear market. Value investors look for stocks that are undervalued by the market and are typically willing to hold on to them for a long period of time, even when the market is in a downturn.