Bull and Bear Market: Definition & Difference

It is done by increasing the government spending, cutting the tax rate to increase disposable income etc. Stock P/E RatiosThe price to earnings ratio measures the relative value of the corporate stocks, i.e., whether it is undervalued or overvalued. It is calculated as the proportion of the current price per share to the earnings per share. Dividend YieldsDividend yield ratio is the ratio of a company’s current dividend to its current share price. It represents the potential return on investment for a given stock.

Are we in a bear or bull market 2022?

Despite the latest rallies in recent days, the broader market has taken a beating this year. The S&P 500 is down 22% since the start of 2022, but there are signs that the bulls will overtake the bears in the new year.

That percentage holds up when it comes to comparative average gains. The bull market average gain of 114% is slightly more than three times the 36% average bear market decline. The term “bull market” is generally linked to a prolonged stock market rise of at least 20%, rather than https://www.bigshotrading.info/ a short quick increase that is part of a cycle of common market volatility. A bear market is when stocks are losing value, the economy looks uncertain, and unemployment might increase. A bull market is a time of economic success, low unemployment, and consumer confidence.

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During a bull market, you’ll most likely get slight dips, but those look like blips on the radar, and the line is generally trending upward, says Young. “When you’re looking at a longer-term chart of an index, it’s sloping upward until there’s a bear market,” she says. During a bull market, optimism and confidence are high, and there’s a great demand to buy stocks.

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  • Bull markets are often categorized as secular or cyclical (indicating a shorter-term period of growth).
  • But shortly thereafter it began to fluctuate, with the Nasdaq entering a bear market in April and the S&P 500 following in June.
  • But even if the Fed doesn’t raise rates, inflation can take a toll.
  • Some of the indicators include moving averages, the bullish and bearish percentage index and the volatility index .
  • During a bear market, the economy slows down and unemployment rises as companies begin laying off workers.

Kevin Mercadante is professional personal finance blogger, and the owner of his own personal finance blog, OutOfYourRut.com. He has backgrounds in both accounting and the mortgage industry. Below are the top 7 differences between Bull Market vs Bear Market. There Bull and Bear Market: Definition & Difference action this year is very reminiscent of previous market topping processes. Tops are hard to identify during the process as “change happens slowly.” The mainstream media, economists, and Wall Street will dismiss pickup in volatility as simply a corrective process.

Key Differences Between Bull and Bear Market

Bearish trends typically last longer than bull markets which have shorter duration periods, with the amount of bearish traders overwhelming the amount of bullish traders . Whether it’s a bear market or a bull market, the key is to keep your investments diversified. By doing so, you weather any downturns and grow your money in the long-term. This means spreading out your investments into hundreds of different companies, instead of just a select few.

The Securities and Exchange Commission defines a bear market as a broad market index decline of 20% or more over at least two months. The characteristics that makeup bull and bear market types differ greatly, and determining the difference between bull and bear markets can be difficult to understand for beginner traders. In this article, we’ll break down everything you need to know about bullish sentiment and bearish sentiment. The market is said to be a bulls market when a rise of 20% in the whole sole performance of the stock market is observed. On the contrary, bears market is when the overall downfall of 20% in the performance, is noticed. In simple terms, when the market trend is rising, it’s bull market, whereas if there is a fall, its a bear market.

Investing in a bear market

It takes much longer to recover from a bear market than it does for a bull market to reverse direction, because investors and traders need more time before taking high risk trades again. Many crypto holders look for strategies for sustainable success and prefer long-term strategic asset allocation, such as dollar-cost averaging . Alternatively, not participating in a bear market is also a common choice for holders, as it allows them to prepare for the next bull market. Sourced from CoinDesk.One of Bitcoin’s bear markets came swiftly after its peak in late 2017. As a result, supply overwhelmed demand, and prices gradually trended lower. Within this period, Bitcoin migrated from the highs of US$17,527 in January 2018 to the lows of US$3,236 in December 2018.

Bull and Bear Market: Definition & Difference

Thus, it isn’t unusual for a bear market to experience days or months of upward momentum and turn downward again. While there have been several bear markets in U.S. history, the economy generally spends more time expanding than contracting. This means that the market spends more time as a bull than a bear. Since less time is spent in bear markets than bull markets, they tend to become highly publicized occurrences. Bullish traders typically buy stocks when the market is trending upward and sell them off when they start to decrease in value, which leaves profits on their hands during a bull run. Bearish investors normally do the opposite by selling shares of stock after it increases in price and then buying more once its reaching it’s low point again.


This strategy protects investors from sudden shocks like flash crashes, but in a prolonged bear market, it’s likely to lose even more, as the bought puts that expire are worthless. Short Selling is a trading strategy designed to make quick gains by speculating on the falling prices of financial security. It is done by borrowing the security from a broker and selling it in the market and thereafter repurchasing the security once the prices have fallen. Most experts agree that a bear market is one in which securities prices have fallen 20% from recent highs, if not more, spawning widespread pessimism from investors.