Every market has opportunities for investors, whether they’re bullish or bearish.

By Marc Guberti, U.S. News & World Report featuring Brian Spinelli, CFP®, AIF®Co-Chief Investment Officer

The stock market and other financial assets endure market cycles that impact values and opportunities. While market cycles have varying lengths and volatility, investors use two categories to group market cycles: bullish markets and bearish markets.

Investors can deploy strategies in bullish and bearish markets to realize gains on their capital. Every market has opportunities, but not knowing the differences between bullish and bearish markets can hurt your total returns.

Fundamental and technical analysts both consider bullish and bearish sentiment when making decisions. Fundamental analysts usually look at financial performance and broader economic issues, while technical analysts look for short-term indicators such as moving averages and reversals.

Here are a few things to keep in mind as you learn more about the distinctions between bullish and bearish markets, and how each can affect your investment strategy:

  • How do bullish and bearish markets work?
  • How long do bullish and bearish markets last?
  • Signs of bullish and bearish markets.
  • Navigating bullish and bearish markets.

Bullish and bearish markets are complete opposites of each other. Some investors look at the broader economy to gauge sentiment, while others look at sectors. It is possible for an industry to experience bullishness while the broader market experiences bearishness, and vice-versa.

Peter J. Klein, chief investment officer and founder of Aline Wealth, explains the key differences: “The terms ‘bull market’ and ‘bear market’ have much to do with technical (chart) patterns. The horns on a bull rise up – the bull charges forward and raises his head with his horns toward the sky. The bear, however, comes at their prey with their claws and comes down on them – downward motion.”

For the most part, rising prices accompany a bullish market, while declining prices accompany a bearish market. But it’s possible for a trading session to contradict the current market cycle. For instance, bullish markets include days when asset prices decline. Bullish markets do not mean everything goes up every day. There can also be outliers, such as a company that reports excellent earnings in the middle of a bearish market.

Bullish and bearish markets can last for prolonged periods. Investors have definitions for what constitutes each of these markets. Brian Spinelli, a certified financial planner and co-chief investment officer at Halbert Hargrove, explains the percentages that matter for defining these markets: “A bullish market is usually defined as a period where markets go up over 20% in a period of time from the most recent low. While this is more widely used to reference stock markets, it can apply to bonds, real estate and other investment asset types.”

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