What Is the Difference Between a Bull and Bear Market?

What is the difference between a bull and bear market? A bull market is when the stock market is in an uptrend or rising channel, hence the term bullish. A bear market is when the stock market is in a downtrend or falling channel, hence the term bearish.

What Is the Difference Between a Bull and Bear Market?

  • What is the difference between a bull market and a bear market? A bull market means price is in an overall uptrend. A bear market means that price is in an overall downtrend. Bulls try to push price up and the bears try to push price down.
What is the Difference Between a Bull and Bear Market

For those of you new to trading or investing for that matter, it’s vital you understand because, without a doubt, this will determine if you make money.

This might seem counter-intuitive, but buying when people are panic selling and selling when people are rushing to buy is your key to success.

Today I’m going to show you the differences so you can be on the right side of a trade or investment. First things first though, let’s do a little bit of a refresher on the basics.

The market trades in cycles. That means what goes up must come down and visa versa. As a result, don’t let bear markets scare you.

Our trading service believes in the importance of knowing what is the difference between a bull and bear market as well as how to trade them. 

In fact, bear markets can be a great thing because, in essence, stocks go on sale. However, it can be a little hard to tell when the bottom is formed.

Therefore, make sure you have the tools necessary to help you find stocks to trade as well as proper stock training. In fact, we have an alert service that can be useful in any market. 

If you’re unsure of how to find stocks to trade, check out our penny stocks list along with our stock watch lists. These have trading alerts setups for you to look at. 

What Is a Bull Market?

What is the difference between a bull and bear market? Simply put, bull markets are characterized by a strong, aggressive upward move over a period of time.

When the market starts to rise, people get excited – somewhat irrational, and pour more and more money into the market. 

Prices start to rise, and boom, the domino effect starts. Enter the asset bubble. You see bull markets and asset bubbles occurring, not only with stocks, but in other investments such as bonds, commodities, and housing.

There can be a number of factors that can cause a bull market. However, two that come to mind would be a strong economy coupled with high employment levels.

What Is the Longest Bull Market in History?

  • The longest bull market on record for stocks occurred between 1990 and 2000. Not surprisingly, it also provided the highest returns, as measured by the S&P 500. This period saw stock prices rise by a shocking 417%. Coming in at a close second is the bull market from March 2009 to present. As of December 2018, returns closed in on 295%. To put this into perspective, the average return of all bull markets since 1932 has only been 165%.

This seems paltry in comparison. Therefore, it’s important to know what is the difference between a bull and bear market.

Check out our trading room if you want to see us talking markets in real time.

What Is Considered a Bear Market?

  • Stock market experts consider falls of 20% or more over the course of two months or more to be a bear market. They consider falls of 10% or less to be a market correction. They usually use the S&P 500 as a guide to determine whether the overall market is bullish or bearish.

What is the difference between a bull and bear market? Just like the economy and job growth simulates a bull market, a bear market is spurred by the opposite. And as you know with bubbles, eventually they all burst.

And the stock market is no exception. When the bubble bursts, prices fall and they fall hard.

If they fall 10% or less, it’s simply a market correction. But most experts agree if the fall is 20% or more, it’s a bear market. When that happens, people get scared and either stop investing in the market altogether or panic sell and pull all their money out.

Both scenarios have dire consequences. Check out our stocks lists page if you’re looking for stocks to trade in any market. In fact, we have a gold stocks list for just such the time as a bear market occurs. 

How Long Will a Bear Market Last?

  • There’s no steadfast answer to how long a bear market will last. It depends widely on the situation and what is going on in the economy. The Coronavirus of February 2020 has just started, so we will see the impact moving forward. In some instances it can last for just a few weeks, a few months to even years. The two nastiest bear markets happened in 1929 and between 2007-2009.

If you noticed, these would be in sync with the recessions. In the worst of them, the crash in 1929, the crash lasted 2.8 years and saw a loss in value of 83.4% from the S&P 500.

One of the most famous examples of a bear market takes the form of the 1987 market crash, which saw a 29.6% drop that lasted roughly three months. Fast forward to 2007-2009 where we saw the value of the S&P wiped out by 50.9%. (read our bearish vs bullish and how to profit in any market post).

Coupled with the crisis in subprime mortgages this snowballed into a full-blown financial crisis. Knowing what is the difference between a bull and bear market helps you to understand when we’re in a bear market as opposed to a market correction.

What is the Difference Between a Bull and Bear Market

This is the monthly S&P 500 chart. Highlighted is the 07-09 bear market.

8 Key Differences: What Is the Difference Between a Bull and Bear Market

There are eight key differences in knowing what is the difference between a bull and bear market. I think the main thing to remember is that a bull market is characterized by an overall general sense of optimism.

And it’s this optimism that tends to catalyze greed resulting in positive growth. A bear market is associated with uncertainty which tends to instill fear in the hearts of stockholders.

In light of these differences, let’s break them down further:

Market Direction

It’s a bullish market when performance is on the rise. On the other hand, a bearish market is when the performance of the market is on the decline. The most cut and dry answer to what is the difference between a bull and bear market.

Investor Outlook

In a bullish market, investors are very optimistic, and this is reflected in investors taking long positions as they feel prices will rise further. Conversely, in a bearish market, the market sentiment is quite pessimistic and reflected by investors taking a lot of short positions. However, it is important to realize short selling is a great opportunity to make money as well.

Economic Growth

During a bullish market, you will see substantial economic growth. On the contrary, the economy in a bearish market will either fall or not grow at all. A key point to remember is an indicator like the GDP (Gross Domestic Product) will give you a bird’s eye view of how the economy is performing based on the existing factors.

Market Indicators

In a bullish market, the market indicators are very strong and vice versa in a bearish market. Take the market breadth index for example. It is an indicator measuring the number of stocks increasing versus those which are falling. If the index is greater than 1.0, this indicates a future rise in market indices. On the other hand, if the index is below 1.0 it means a future decline. It comes as no surprise then in a bearish market, the market indicators are not strong (how does shorting a stock work? Learn how).

Liquidity

In a bullish market,  we see a lot of liquidity flowing into the market. This is due in large part to investors actively pumping more and more funds into the market. That coupled with increased trading activity and investing in stocks, gold, real estate, etc. results in a bull market. Nonetheless, in a bearish market, the liquidity dries up and the investments made during a bullish scenario are either sold preventing further downsides or held back. Keep an eye on vwap when intraday trading.

IPO Activities

Typically are encouraged in a bullish market because the market sentiment is positive and people are willing to invest their money. 

Interest Rates

In order to encourage business to grow, a lot of times the banks will reduce interest rates on loans. But, during a bearish market, we typically see the interest rate increased to curb the use of money. 

Yields

 When we’re in a bullish market,  yields on securities and dividends will be lower than those of a bear market. We want higher yields and dividends in a bullish market to lure investors in with the promise of higher yields at a later date.

Should You Buy in a Bear Market?

Yes, of course, you should, but only if the setups are good and you see reversal patterns! The #1 Rule of investors: act opposite of the investing public; take advantage of fear and greed. Buy when there’s fear. Be like a guerrilla soldier and strike quick and fast.

Find those quality stocks at rock bottom prices and swoop in and buy them. When the market turns around, sell them to the greedy buyers when the prices rise (read about the different types of stocks).

Wrap Up: What Is the Difference Between a Bull and Bear Market?

In conclusion, whether it is a bear market or bull market, do exactly the opposite of what everyone else is out there doing. And what you DO matters!

In the words of Dale Carnegie, “Inaction breeds doubt and fear. Action breeds confidence and courage. If you want to conquer fear, do not sit home and think about it. Go out and get busy.”

Better yet, why don’t you get busy with us. At Bullish Bears, we will help you take the first step to achieve your goal of financial freedom. Our online trading courses are provided as a tool to learn different ways to trade in different markets.

As a result, you’ll be prepared for any market that comes your way when you know what is the difference between a bull and bear market definition. Results come to those who “act”, don’t wait, do it now! 

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