They may be the best-known symbols in the investment world—a bull charging forward and thrusting its horns upward, signifying good times and a sustained rising stock market…and a bear swiping its claws downward, representing crashing markets and uncertainty.
Bull and bear markets are parts of normal long-term cycles of the stock market, but their dynamics elicit such extreme emotion that it is easy to make critical mistakes and compromise your portfolio returns.
Bottom Line Personal spoke to stock market historian and investment advisor Jeffrey A. Hirsch to better understand what triggers bull and bear markets…how long they each last…ways to navigate and invest in them…and where stocks are in the cycle right now.
How do investors know if we are in a bull or a bear market?
Unlike with a recession, there is no official designations or governing body that decides the start and end points of bull and bear markets.
A bear market is widely regarded as a downturn in which the S&P 500 stock index falls 20% from its most recent high. Bear markets often coincide with economic downturns, increased volatility, higher unemployment and investor pessimism, which causes a reduced demand for stocks. Notable bear markets include ones associated with the Dot-Com bubble (2000–2003) and the COVID-19 Pandemic (2020). Lesser stock market declines have their own definitions—a drop of 10% to 20% is widely regarded as a correction…a decline of 5% to 10% is referred to as a dip or a pullback.
A bull market is an extended period of upward-trending prices, typically when the S&P 500 rises at least 20% off its most recent bear market lows. Bull markets are typically accompanied by a healthy economy, strong corporate earnings, robust consumer spending and widespread investor optimism with a higher willingness to take risks. The longest bull market in US history ran from 2009 to 2020.
How common are bull and bear markets?
Since 1946, the S&P 500 index has experienced about a dozen of each—but that is where the similarity ends.
Bear markets tend to be short, averaging about 10 months with a loss of 35%. (The COVID-19 Pandemic bear market of 2020 lasted only 33 days.)
The average bull market saw a 111% gain and lasted about five years. Since 1970, bull markets have gotten noticeably stronger, averaging gains of 186% due to the widespread availability of financial information and investment products and greater investor participation in the stock market. About 62% of all US households now invest in stocks.
My takeaway: The odds of making money in the stock market over the long term are greatly in your favor. Stocks have been in bull market mode far more often than bear market mode. Although it is difficult to watch your portfolio shrink during bear markets, stocks have always recovered and gone on to new highs, often for extended periods.
What triggers bull and bear markets?
It is a common misconception that booming economies cause bull markets…and that recessions and stock market bubbles cause bear markets. While these conditions are often present and can impact the length and impact of a bull or bear market, stocks are forward-looking indicators. They reflect investors’ expectations for the next six months or longer rather than the current economic environment. That is why the US stock market often peaks several months before the start of a recession and bull markets can be born when the economy is still mired in negative growth.
What actually ignites bull and bear markets is more complex and makes them so hard to predict. It is a combination of surprising, exogenous events that dramatically shift investor sentiment. These events can range from fiscal policy actions to natural disasters, wars, economic and financial crises and drastic societal changes.
Examples: The 2022 bear market began when investors recoiled over the uncertainty of the Russia–Ukraine war and due to rampant inflation and pandemic-era global supply-chain disruptions. Conversely, the 2009 bull market began as Washington, DC, unleashed tax cuts and stimulus funds to help households struggling during the Great Recession and the Federal Reserve dropped short-term interest rates to near-zero, making it cheap for companies and consumers to borrow, spend and invest. The more recent 2023 bull market took off as high inflation showed signs of peaking and the release of ChatGPT set off the current artificial-intelligence boom.
What are the biggest mistakes long-term investors make in bull and bear markets?
In bear markets: Panic selling. When your portfolio declines, you only have losses on paper. Selling your core portfolio assets or long-term holdings locks in your losses and prevents you from benefiting from an eventual market rebound. Going to cash also presents a difficult secondary decision about when to get back into the market
In bull markets: Overconfidence. You start thinking you are a stock-picking genius, jumping into risky investments at inflated prices without doing research. Warren Buffett wryly called this type of bull market behavior the preening duck—it “quacks boastfully after a torrential rainstorm, thinking that its paddling skills have caused it to rise in the world. A right-thinking duck would instead compare its position after the downpour to that of the other ducks on the pond.” Overconfidence is especially dangerous in the later stages of a bull market, when bubbles form and investors allocate a disproportionate amount of their portfolios to high-risk assets and expose themselves to larger losses if the market turns.
What is the smartest way to invest in bull and bear markets?
Actually, it is the same strategy for both—plan and maintain a long-term asset allocation to stocks and bonds…and dollar-cost average—that means regularly investing a fixed amount of money each month regardless of market price.
It is difficult to anticipate or manage the peaks and troughs of bull and bear markets, even for professionals. Dollar-cost averaging in volatile markets helps manage risk, reduces the impact of emotional decision-making and can result in a lower average purchase price, all while promoting a disciplined investment strategy.
Caveat: Some investors may want to tilt a small portion of their portfolios to be more aggressive in bull markets or more defensive in bear markets. Here’s how to do that…
Bull market investment moves: Increase the portion of your portfolio allocated to stocks, especially in areas of the market that tend to lead in bull markets including growth-oriented stocks and small-cap stocks…as well as to sectors such as technology and consumer discretionary.
Bear market investment moves: Dial up the percentage of your portfolio invested in short-term government bonds or cash. Look at dividend-paying stocks—they help mute the volatility of bear markets because the income you get counteracts the losses in other assets. Gravitate toward sectors that hold up best in bear markets including consumer staples and utilities.
Are we in a bull or a bear market now?
As of early June 2025, we continue to be in the bull market that began in October 2022. Earlier this year, it looked like the bull market was doomed. The S&P 500 experienced significant losses triggered by draconian US tariff policies that frayed investor confidence and led many companies to predict weaker earnings growth in the future. The odds of a recession spiked. From its record high in February, the S&P 500 fell 18.9% by April 8, just short of a bear market. Since then, the de-escalation in trade tensions has supported markets. The S&P 500 managed to stage a remarkable comeback, erasing most of its 2025 losses and approaching its all-time highs once again. But given the continuing uncertainty in the economy and government policy, it is unlikely this year’s bull market will see the robust 20%+ gains of 2023 and 2024.
