With the fluctuating economy still affecting a lot of retirement planning, AIP Marketing Alliance, an Integrity Company, wants to share some facts to help you understand the concepts of bull and bear markets. These market trends can impact your client’s strategy – especially if they are riding the highs and lows associated with both conditions.

• What is a bull market? When market prices rise for an extended period – typically months or years – at least 20% from their most recent low.
• What is a bear market? The same idea as a bull market, but when market prices fall from their most recent high.

What are some of the causes of a bull or bear market?

Many factors contribute to bull and bear markets, but directional movement ultimately is about whether investors think corporate earnings will rise or fall. External shocks can trigger significant buying or selling in the market. For example, the start of the war in the Ukraine and the onset of the COVID-19 pandemic are the most recent examples.

While bull and bear markets last for extended periods, bull markets include bouts of selling and bear markets can include rallies.

How can you tell what’s ahead?

• Watch the economic environment. It’s generally bullish if interested rates are falling and corporate earnings rising; the opposite scenario is generally bearish.
• Pay attention to Treasury bond yields. These yields typically are a key indicator of investor sentiment.
• Look for extremes in trading activity by individual investors. Sustained heavy buying could mean irrational optimism – and vice versa.

What could a consumer do when a bear or bull market happens?

• Consult with your financial advisor or insurance agent for advice and perspective.
• Stick with your long-term strategy whether prices go up or down.
• Stay calm and try to keep emotions out of your decision-making process.
• Maintain portfolio diversification and rebalance on a consistent schedule.
• Don’t invest in the latest speculative fad or in business you don’t understand.
• Avoid the wishful thinking that somehow “this time is different.” It’s not.

Timeline of strongest bulls, weakest bears since World War II (1)

• +267.1% (Bull) – 2,607 days from 6/14/49 to 8/2/56, Post-war boom
• -28.0% (Bear) – 196 days from 12/12/61 to 6/26/62, Kennedy Slide
• -36.1% (Bear) – 543 days from 11/29/68 to 5/26/70, Vietnam unrest and rising rates
• -48.2% (Bear) – 630 days from 1/11/73 to 10/3/74, first oil shock and collapse of Nifty Fifty
• +125.6% (Bull) – 2,248 days from 10/3/74 to 11/28/80, post-Vietnam transition
• -27.1% (Bear) – 622 days from 11/28/80 to 8/12/82, recession
• +228.8% (Bull) – 1,839 days from 8/12/82 to 8/25/87, rates fall with economy expanding
• -33.5% (Bear) – 101 days from 8/25/87 to 12/4/87, portfolio insurance crash
• +582.1% (Bull) – 4,494 days from 12/4/87 to 3/24/00, dot-com boom and globalization
• -49.1% (Bear) – 929 days from 3/24/00 to 10/9/02, internet bubble and 9/11 recession
• +101.5% (Bull) – 1,826 days from 10/9/02 to 10/9/07, mortgage bubble and excessive leverage
• -56.8% (Bear) – 517 days from 10/9/07 to 3/9/09, financial crisis
• +400.5% (Bull) – 3,999 days from 3/9/09 to 2/19/20, post-crisis expansion
• -39.9% (Bear) – 33 days from 2/19/20 to 3/23/20, COVID-19 pandemic panic
• 114.4% (Bull) – 661 days from 3/23/20 to 1/3/22, COVID-19 pandemic recovery

Did You Know?

• The origins of “bull” and “bear” are unclear. A popular theory is that bulls attack their opponents by thrusting their horns upward, while bears claw downward.
• Bear markets have been shorter than bulls. Since the 1920s, the average bear market lasted 341 days – only 30% of the average bull markets is 1,102 days (2).
• Tulip mania. In one of the earliest recorded bull markets, the price of a Dutch tulip bulb rocketed 2,000% between November 1636 and February 1637, then plunged 99% in three months (3).

Based on the current economic conditions, we will have to see the direction that the markets take as we approach a potential bear market with inflation rising throughout 2023. AIP Marketing Alliance will keep you informed in our blog and social media website when our team comes across potential articles and posts that shed more light on current economic conditions.

Disclaimer: The information and opinions expressed herein are provided by third parties. These sources are believed to be reliable but accuracy and completeness cannot be guaranteed by any provider of the information. Information is provided for informational purposes only and is not and should not be considered a solicitation to buy or sell any products mentioned. The information should not be used as the sole basis for any financial decisions, nor should it be construed as advice applicable to your specific financial situation. Please consult your personal financial, tax and/or legal professional(s) for guidance on your specific financial situation and decision-making.

(1) Refers to percent changes in the S&P 500 index. Source: Stock Market Historical Tables: Bull & Bear Markets, Yardeni Research, October 28, 2022.

(2) Ibid.

(3) Crises, Manias and Irrational Exuberance, AMG Funds, August 18, 20 18.