rental property investing

Bull Market vs Bear Market – Stocks 101

In the stock market you are either a bull or a bear. If you’ve ever seen the Charging Bull, a bronze bull in New York, then you should know that it is an icon of Wall Street symbolizing optimism and prosperity.

In stock market lingo, a bull is an investor who is optimistic that stock prices will rise and a bear is an investor who thinks stock prices will fall. Wall Street is always a battle of bulls and bears clashing but historically bull markets are stronger than bear markets.

From January 1st to December 31st the market is tracked via the indices discussed earlier. If the S&P 500 is positive 20% or more for the year then that year was a bull market. If the index went negative 20% or more then the market was considered a bear market as many investors were selling and driving stock prices significantly lower.

History of U.S Bear vs Bull Markets Since 1929

Bear Market Statistics

  • Since 1929 there have only been 25 bear markets (as of 2014)
  • 10 months is the average length a bear market period lasts
  • Average Bear Market loss: -35%
  • Smallest Loss: -21% (1949)
  • Largest Loss: -62% (1932)
  • Average frequency of bear market occurring since 1929 – every 3.4 years
  • Last bear market ended in 2009
  • October 2007 to November 2008 we saw a -52% market (investors lost big)

Bull Market Statistics

  • Since 1929 there have been 25 bull markets (as of 2014)
  • 31 months is the average length of a bull market
  • Average Bull Market gain: 104%
  • Smallest Bull Market: 21% gain in 2001
  • Largest Bull Market: 582% from 1987-2000
  • Average frequency: 3.4 years

Summary: As an investor you should expect the market to go up and down each year but historically the bull markets produce larger gains than the losses endured during bear markets. This should ease the fears many people have of investing because historically your money is guaranteed to grow over the long term. Currently at the time of this tutorial we are over 5 years into a bull market which is a lengthy time compared to the 3.4 year frequency. This leaves some to speculate how close the next bear market might be while others argue that the huge crash in 2009 could result in a long bull market recovery for several years similar to the 1987-2000 bull market span.

Trillions of dollars flow into the stock market and trillions of dollars flow out of the stock market where they are placed into other assets. As long as investors are optimistic about stocks and more money keeps flowing into the market than out, then the bull market should continue.

Overall, keep in tune with the market indexes monitoring how the general market is doing and look for bearish signs that the market is turning cold. In the event that a bear market approaches, investors might readjust their investment portfolio moving money out of stocks and into other asset classes like bonds, CD’s, and real estate.

Read: Stock Investing 101: The Investors Quick Guide

Read: How to Set Up a Stock Trading Account

Read: How Much Money Do You Need to Start Investing

Resources

For more tips, tools, and time-savers, visit our Resources Section through the menu bar at the top of the page or access each of our resource pages through these individual links:

Be great today,

Nick Foy

P.S. Get up to speed on stock market basics with my newest eBook on stock investing – The Book on Stock Market Investing: A Beginner’s Guide.

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