Fluctuations in the stock market are inevitable, as national and global circumstances are constantly changing. The only thing you can control is your reaction, and how informed you are about trends in the market.
What is a Bull Market?
A bull market is marked by a rising stock market: specifically, a 20% rise in stock prices following a previous 20% decline, followed by another 20% decline. These spikes in stock prices are called bull markets because of their aggressive upward motion — much like how a bull rears its head.
What Causes Bull Markets?
Bull markets are caused by a strengthening economy and tend to align with strong GDP and a drop in unemployment. They also often coincide with a rise in corporate profits.
Characteristics of Bull Markets
A few foreshadowing characteristics of a bull market are climbing stock prices, increasing investor confidence, and a strong national economy. The actual dates of a bull market, however, can only be known in retrospect.
Example of a Historic Bull Market
The bull market from 2009-2020 was the longest bull market in US stock history. It lasted from the 2008 economic crash to the Covid-19 pandemic.
What is a Bear Market?
A bear market occurs when securities fall for a sustained period of time, specifically when the stock market falls 20% or more from a recent peak. This downward trend in the market is called a bear market because of the way it resembles the way a bear attacks: with a downward swipe.
Characteristics of Bear Markets
Bear markets are characterized by declining stock prices, an overall poor economy, and a feeling of panic and pessimism in investors.
Causes of a Bear Market
While there are many reasons a bear market might occur, the general causes include market bubbles bursting, public health crises, geopolitical crises, or broad economic shifts.
Examples of Historic Bear Markets
The first and longest bear market was in 1929-1932, accompanied by the Great Depression. The most recent bear market was a three-month stock crash caused by the initial havoc of the Covid-19 pandemic.
As the stock market is always changing, it’s important to stay informed about different trends and how to respond to them. In general, we strategize with these ups and downs in mind. If you have questions about your current plan, and whether it’s updated for changing personal circumstances considering today’s market scenarios, give the office a call.
This material was developed and prepared by a third party for use by your Registered Representative. The opinions expressed and material provided are for general information and should not be considered a solicitation for the purchase or sale of any security. The content is developed from sources believed to be providing accurate information.
All investing involves risk, including the possible loss of principal. There is no assurance that any investment strategy will be successful.
Understanding Bull and Bear Markets
June 23, 2023