Bulls Charge, Bears Swipe—What Does That Mean for You?

Behavioral science tells us current events have a greater impact on our perception and decisions than the past or what historical data shows us. In today’s environment, uncertainty reigns, leaving many investors often questioning whether the most current market disruption is here to last. But, history shows that even though stocks rise and fall in the short term (short term could even mean years), they tend to reward investors over longer periods of time.

When the stock market experiences a sustained trend in one direction, it's commonly referred to as either a bull market or a bear market. We thought this would be a good time to explain what those two terms mean in terms of investing and the market, and provide an easy analogy to remember which is which.

What is a Bull Market?

A bull market is when the stock market is going up for an extended period. It’s called a “bull” market because bulls attack by thrusting their horns upward, just like the market trend.

• A bull market usually happens when the economy is doing well. The market is trending up.
• People feel good about investing, investor sentiment is high, so they buy more stocks.
• This demand pushes prices higher, which attracts even more investors.

What is a Bear Market?

A bear market is when the stock market is going down, and prices are falling steadily, usually by 20% or more from recent highs. It’s called a “bear” market because, like a bear swiping its paws downward, the market is trending down.

• A bear market often occurs when people are worried about the economy, such as during a recession, rising interest rates, or global uncertainty.
• Investors start selling off their investments out of fear or caution.
• This selling causes prices to drop even more, creating a cycle of lower confidence and falling values.

Easy way to remember:

Bull = Up (bulls charge upward with their horns)
Bear = Down (bears swipe downward with their paws)

As Warren Buffett said, “The market is the most efficient mechanism anywhere in the world for transferring wealth from impatient people to patient people.”

Investing will always be uncertain. Bull and Bear markets will always be part of the cycle, which is why it’s so important to have a long-term focus and a defined timeline. Creating and sticking to a thoughtfully constructed investment plan is critical to avoid making short-sighted decisions.