Bull vs. Bear Market: How to Invest Through Every Cycle
Stroll magazine is not affiliated with CWM, LLC. Opinions expressed in the magazine may not be representative of CWM, LLC. Investment advisory services offered through CWM, LLC, an SEC Registered Investment Advisor. Carson Partners, a division of CWM, LLC, is a nationwide partnership of advisors. Al
Whether you’ve been investing in the stock market for a few years or a few decades, you likely know the thrill of a bull run
and the unease of a bear market. The real challenge isn’t navigating one or the other; it’s in building an investment
portfolio that can strategically advance through both.
What Is a Bull Market?
A bull market is a sustained period when stock prices rise at least 20% or more from recent lows, usually accompanied by
widespread investor optimism and economic strength. It’s not just a short-term rally, but a prolonged upward trend. Bull
markets last an average of five years.
What Is a Bear Market?
A bear market is when stock prices decline by 20% or more from recent highs, typically for an extended period.
Key Differences in a Bear Market vs. Bull Market
So, how do you tell the difference between a bull market and a bear market? While both are fundamental phases of the
market cycle, bull and bear markets operate as near-perfect opposites. Understanding their distinct characteristics is
crucial for constructing an informed investment strategy. Rather than reacting to headlines, advisors who understand and
communicate these differences can provide clarity and help instill confidence during times of change.
Bull vs. Bear Markets
Attributes Bull Market Bear Market
Prevailing Conditions
Sustained upward trend in prices
(typically a 20%-plus rise from a
low).
Sustained downward trend in
prices (typically a 20%-plus
decline from a high).
Investor Sentiment Confident, optimistic, and risk-
tolerant.
Pessimistic and risk-averse; fear
of loss dominates decision-
making.
Economic Factors
Generally strong: GDP growth, low
unemployment, rising corporate
profits.
Generally weakening: Slowing
GDP, rising unemployment, falling
corporate earnings.
Typical Market Behavior
High trading volume on up days;
shallow and brief pullback; broad
participation across sectors.
High trading volume on down
days; sharp but fleeting rallies;
narrow, defensive leadership.
How do bull vs. bear markets affect long-term portfolios?
Bull markets build portfolio value through capital appreciation, while bear markets test and validate the portfolio’s
resilience and asset allocation. For a disciplined long-term investor, both phases can be necessary components of
compounding wealth.
How Investors Can Navigate Bull and Bear Markets
Investing during a bear market can allow you to capitalize on potential rebounds and emerge stronger from the downturn.
In a bull market, your primary goal should be to participate in the uptrend while prudently managing risk. This typically
means favoring growth-oriented assets—such as stocks and sector ETFs—that lead the charge but avoiding speculative
excess.