Bull vs Bear Overview, Market Phases, and Factors

After the dot-com crash in 2000, the Fed slashed interest rates and borrowing took off — including among home buyers with subprime credit. Complex financial products — like the collateralized debt obligations into which those mortgages were packaged — soared. The balance sheets, profits and share prices of the banks that created and traded these products swelled. Another notable bull market was between 2003 and 2007 when the stock market made a significant increase and the S&P 500 nearly doubled in value over this period.

Of the 25 bear markets that have occurred since 1928, fourteen (56%) have also seen recessions while eleven have not (44%). You can shift the prism in multiple ways and draw your own conclusions that align with your beliefs and education as an investor. The periods when the U.S. economy was in a recession are shaded in gray. There’s a lot of pessimism among investors as we approach another new year.

It also includes the most recent market plummet in the fourth quarter of 2018. Much of this massive drop was caused by fears of a global economic slowdown, a U.S.-China trade war, and rising U.S. interest rates. Meanwhile, the bull market following the Great Depression is close behind our current bull market.

As a comparison, in a recession, money usage by banks is curbed, and interest rates of loans go up, limiting investments and leading to a bear market. The chart below shows how bull markets can last for years, but the average growth remains around fxtm broker reviews 6% throughout. This term is thought to have come from the idea that bulls thrust with their horns upward, whereas bears swipe their claws downward. A bullish or bearish behavior – these metaphors indicate price fluctuation in the market.

Historic bull markets

As an example, let’s look at some of the longest bull markets since World War II. Below, you can see the longest bull runs and their growth according to the S&P 500, including the most recent and longest one between 2009 and 2020. A bear market is the opposite of a bull market since a bear market is where prices of stocks, securities, or assets continue to decline over some time. High investor confidence in line with a stable economy will help the market to grow.

Companies that sell products directly to consumers (as opposed to industrials) have proven themselves over decades. Bull markets in recent years have tended to be powered by such companies, but more importantly, they may be a decent safe harbor during downturns as well. Consider investing in these equities, or in a large-cap mutual fund with such stalwarts. The term “bull” is also believed to describe how confident investors “charge” the market, much like how provoked bulls tend to charge at full speed toward their opponents. The investment information provided in this table is for informational and general educational purposes only and should not be construed as investment or financial advice. Bankrate does not offer advisory or brokerage services, nor does it provide individualized recommendations or personalized investment advice.

  • Unemployment was at an all-time low, and the quality of life was improving globally.
  • However, as spending and production increase, the prices of goods and services can inflate.
  • We do not include the universe of companies or financial offers that may be available to you.
  • The methods for measuring the length and magnitude of bull and bear markets alike differ among analysts.
  • Much of the volatility in markets is due to investor sentiment, or how investors in general feel prices are going to swing.

During this period, oil prices fell continually and unevenly until they reached a bottom. Another definition of a bear market is when investors are more risk-averse than risk-seeking. This kind of bear market can last for months or years, as investors shun speculation in favor of more stable financial investments.

The future isn’t dictated by the past. But there are lessons to be learned by looking back.

Buchbinder says the S&P 500 may be due for a pullback in coming months following its strong run in the first half of 2023 But a short-term correction doesn’t mean the bull market is coming to an end. Several aspects, such as supply and demand, change in economic activities, and investors’ psychology affect the market td ameritrade forex review – whether it goes bull or bear. When a Bull market comes to an end, a bear market follows, 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.

2022 brought the first sustained bear market in more than a decade. One potential seasonal tailwind for stocks next year is that it’s an election year, or the fourth year of the presidential cycle. Stocks have historically gained an average of 7.3% during election years. And the gains are even stronger during the election year of a first-term president, which is the case for Joe Biden in 2024. The term ‘bull’ originally meant a speculative purchase in the expectation that stock prices would rise; the term was later applied to the person making such purchases. There are 4 phases that occur during bull markets, and each is affected by a variety of factors that can change over time and lead to the next phase.

Top-line growth

It can be tempting to go all-in on a hot stock or sector when the market has been growing, but the end may be closer than you think. If you’ve only bought the biggest so-called winners, you may find that their pumped-up prices evaporate the quickest. Because it’s impossible review the physician philosopher’s guide to personal finance to tell when a market has reached its top from a ground-level perspective, it’s very difficult to foresee the turning point before you are in it. After the October 2022 low point, the stock market was able to recover some of its losses in the fourth quarter.

Are we in a bull market as of 2022?

While each investor’s strategy may vary, here are some common things people do during bull markets. 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.

Part of the difficulty is that psychological effects and speculation may sometimes play a large role in the markets. Overall, no one knows when a transition from a bull market to a bear market is likely to happen. These shifts in the market can happen slowly over time, and the exact dates can be determined only in retrospect. Hence, it is hard to predict whether prices will continue to increase or when the market will crash. There are several other types of investing strategies typical for a bull market. They often vary from bear market strategies due to more favorable market conditions.

You’ll also see the percentage growth of stocks and bonds during that time. When the economy hits a rough patch, for instance in the face of recession or spike in unemployment, it becomes difficult to sustain rising stock prices. Moreover, recessions are often accompanied by a negative turn in investor and consumer sentiment, where market psychology becomes more concerned with fear or reducing risk than greed or risk-taking. During a bull market, there are several characteristics that can be observed.

A bull thrusts its horns upward when it attacks, so the term was adapted to describe stock market growth. The first bull market after World War II remains one of the most impressive. With Europe a shambles, the American economy took off, producing one of the strongest expansions on record. In September 1954, the stock market finally climbed past the peak it had reached in 1929 before the Great Depression.

Why do they call it “bull” market

The bottom line is that bull markets tend to be several years in length and are always preceded by and ended by bear markets. For starters, they generally happen during periods when the economy is strong or strengthening. Bull markets are often accompanied by gross domestic product (GDP) growth and falling unemployment, and companies’ profits will be on the rise.

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