A 20% rise in stock prices, following a previous 20% decline followed by another 20% decline, is one commonly accepted definition of a bull market for stocks. Accompanying a bull market are several things, to mention a few; bull markets generally happen when the economy is strengthening or strong. There will likely be strong GDP growth, and companies’ financial performance will be on the rise along with other better economic data.

Between 1974 and 2018, there were 22 market corrections, and only four turned into bear markets. For most investors, these negative indicators are initial signs to be attentive to a shrinking economy. Consequently, many will start liquidating more volatile assets and place their funds into more stable assets, such as precious metals or government bonds.

Should You Buy in a Bear Market?

Regardless of the current state of the stock market, it’s important to stay focused on the long-term prospects of the companies in which you are invested. Companies with great business fundamentals are likely to produce significant returns for your portfolio over time. The U.S. stock market was in a bullish mode after recovering from the 2008 financial crisis until pandemic-related uncertainty caused a market crash in 2020. The chart below shows that, aside from minor market corrections, a bull market persisted for more than a decade. More specifically, however, a bear market describes any stock index or individual stock that drops 20% or more from its recent highs.

This is not unlike those folks who buy up real estate during slumps in the housing market. It’s impossible to know exactly when a bull market will start, but one way for investors to prepare Bull and Bear Market: Definition & Difference for the next one is to keep buying high-quality stocks, even when they are falling. But this lousy performance might be considered “bearish” over a much shorter period, such as one quarter.

Bear Market

They are one way to get some income from your investments while you hold onto them. The cryptocurrencies with the two largest market caps are Bitcoin and Ethereum. Bear markets can be scary, but they don’t tend to last very long — though that’s admittedly cold comfort for investors going through one. Technical analysis is the main tool to avoid falling into the psychological traps of market cycles.