Bull market vs. bear market: Similarities and differences
How long bull and bear markets last
Bull markets tend to last longer than bear markets, in part because stock prices tend to trend upward over time.
There have been 26 bear markets and 26 bull markets since 1872. Bear markets lasted a median of 19 months (less than 2 years) with a median drop of -33% and durations ranging from 1 month to 113 months (nearly 9.5 years). Bull markets lasted a median of 42 months (3.5 years) with a median spike of 87% and durations ranging from 14 months to 98 months (about 8 years).*
In other words, bull markets historically have lasted a median of twice as long as bear markets—and have seen prices rise more than double what they have tended to fall in bear markets.
How bear and bull markets affect investor behavior
Because prices are trending upward, bull markets typically reflect an overall sense of optimism and confidence in the stock market. More people tend to invest in the market during bull periods to potentially profit. That increased demand for securities increases their price, which can then spur more even demand as even more people want in, sending stock prices—and gains—higher.
Meanwhile, bear markets reflect pessimism and uncertainty. As prices fall, fewer people invest and more people sell off, unwilling to risk losing money as no one knows how low the market will go. With less demand, stock prices decrease even more, which can create the same type of recursive cycle downward that bull markets do upward.
How bears and bulls relate to the economy
First things first: It’s important to note that the stock market is not the same as the economy. The stock market is where buyers and sellers can trade shares of publicly traded companies and indicates how those companies are performing now and how investors believe they may perform in the future. The economy, meanwhile, represents a country’s output and consumption of goods and services by people, businesses, and the government. While these two things certainly affect each other, stock prices can trend upward while economic output slows—and vice versa.
That being said, a robust economy—one with low unemployment, increasing wages, healthy levels of consumer spending and production, and moderate inflation—tends to coincide with a bull market. But it’s difficult to determine if the economic benefits are the reason for or the result of the bull market. A good economy can drive investments in the stock market, which in turn can boost the economy.
There’s a similarly circular relationship between a down economy and a bear market. When unemployment rises and consumer spending falls, companies may seem less attractive to investors, which may lead stock prices to fall into bear market territory. But again, it’s not easy to claim the economic downturn poked the bear market or the bear market spurred the economic slowdown. Though recessions and bear markets are often associated with one another, in about a quarter of bear markets, recessions haven’t happened.*
