By Taylor H. Sutherland, CFP®, CIMA® AIF®, Director of Portfolio Strategy/ Senior Wealth Advisor at Halbert Hargrove
Markets move in cycles, and understanding the difference between bullish and bearish conditions is essential for investors seeking to navigate volatility, manage risk, and stay focused on long-term goals. While these terms are often used casually in financial media, they carry specific definitions and implications for your portfolio strategy.
The detail below is designed to help you understand these events and highlight strategies that you can employ in an effort to limit damage to your long-term investment objectives.
What Is a Bull Market?
A bull market is defined as a sustained period of rising stock prices—typically a 20% or greater increase from recent lows. Bull markets are fueled by investor optimism and expectations for rising corporate earnings. During these periods, consumer confidence is typically improving, while unemployment is low and GDP growth is robust.
Bull markets often begin before positive conditions in the economy actually emerge. These markets tend to continue throughout a business cycle’s expansionary phase. They can be self-reinforcing: As prices rise, more investors enter the market, pushing prices even higher—sometimes well beyond what may be justified by fundamentals or the reality of future outcomes.
What Is a Bear Market?
A bear market occurs when asset prices fall by 20% or more from recent highs. These periods are marked by pessimism and expectations for declining corporate profits. Investors may shift toward safer assets, such as bonds or cash, or seek other alternatives or trading strategies to help reduce portfolio volatility. During bear markets, volatility and pessimism often increase in a self-reinforcing way. Again, these conditions persist often well beyond what may be justified by underlying fundamentals.
Bear markets can be triggered by a range of factors—including rising interest rates, geopolitical events, or inflation shocks. These negative triggers are often unexpected or misunderstood. Market-moving events like these may not be widely anticipated or part of the daily 24/7 news cycle. What’s known is already priced; what’s unknown is unpriced.
How Often is the Market Bullish vs. Bearish?
Historically, markets spend significantly more time in bullish phases than bearish ones. Since the early 70s, there have been seven major Bull & Bear Markets, with the duration and magnitude of bull markets far exceeding those of bear markets:
- Average Bull Market Duration: ~70 months (5.9 years)
- Average Bull Market Return: ~+221%
- Average Bear Market Duration: ~14 months
- Average Bear Market Return: ~-38%
Source: J.P. Morgan Asset Management – U.S. Guide to the Markets as of August 31, 2025
This historical asymmetry underscores the long-term upward bias of equity markets. Investors who remain invested through downturns have historically been rewarded when markets recover.
Trends vs. More Enduring Shifts in Direction
You may have heard the expression that bull markets end with a whimper while bear markets end with a bang. This is generally because the recognition of the end of a bull market cycle takes time to develop.
During bear markets, the first third of losses usually happens in the initial two-thirds of the period, while the last two-thirds of losses occur in the final third. In other words, most of the damage of a bear market happens during the final crescendo of selling when investors’ building pessimism is reinforced by negative commentary from the media. Moments of maximum fear may often beget the most fruitful forward returns.
This also suggests that immediate and out-of-the-blue market downturns often fit the definition of a “correction” versus a traditional bear market. These corrections, generally defined as a short-lived decline of less than 20% of market value, can spook investors and cause them to take defensive postures—just in time for the market to potentially pop back and continue a longer bull market trend.
A great example of this happened during the first and second quarter of 2025 when U.S. markets corrected approximately 19%. Those who made substantial changes to their market exposure may have missed the recovery that has contributed to positive returns on the year. No one said this was easy!
The Relationship Between the Stock Market and the Economy
The general presumption of many investors is that the economy influences the market. That may be intuitive, but it’s misdirected. Historically, over one-, three-, five-, and even 10-year spans, the stock market and economy show zero correlation!
Clients often ask where we think the economy will be in the coming year. Here’s where we direct our focus: What is the market telling us about the future? Correlations between the stock market and the economy turn positive if you shift the economic comparison period forward one year. The stock market operates as a virtual discount mechanism: It represents the collective real-time perspective of where investors think the economy may be in the forthcoming period.
This is not to say there is no influence between the economy and the outcomes for businesses. You can think of the market and the economy as a train on a track: The individual decisions, opportunities, investments and profitability of businesses lay the foundation and direction of the track, while economic, political, fiscal and monetary policies influence the speed of the train on that track.
If you believe in the fundamentals of capitalism, free markets and property rights, you should likewise believe in the “up and to the right” direction of the track—sometimes we’re moving a little faster and sometimes a little slower, but we’re all following the track.
Avoiding Making Forecasts
If there’s one thing we should all agree on it’s that no one can predict the future, at least not in a consistent and accurate way over time. As a fiduciary, we at HH believe it is imprudent to bet our clients’ futures on our hunches about where things may be headed.
Sure, we may get things right much of the time, but those periods of being “wrong” could potentially seriously impair a client’s long-term success. As a discretionary investment advisor, that is a risk, on your behalf, that we’re not willing to take.
Navigating Bullish and Bearish Market Cycles: Strategy Over Sentiment
Whether the market is bullish or bearish, opportunities exist for investors who remain disciplined and focused on long-term goals. Here are a few principles to keep in mind:
- Diversification across asset classes, geographies and investment strategies seeks to reduce risk and capture long-term global growth.
- Maintain adequate cash reserves to help mitigate the risk of needing to tap materially into your portfolio during periods of market stress.
- Rebalance to maintain target allocations and seek to take advantage of market movements.
- Harvest tax losses during downturns in an effort to help improve after-tax returns.
- Avoid emotional decision-making driven by short-term headlines or market noise. One of the traits humans possess that have made us such a successful species is our ability to spot patterns, and particularly threats. These “lizard-brain” responses are helpful in the natural world, but can be harmful in the financial world.
- Check your hubris at the door and don’t bet your future on any one outcome or hunch. You can always be wrong. And even if you’re right, as John Maynard Keynes noted, “the market can remain irrational longer than you can remain solvent.”
How an Advisor Can Help You Through Bull and Bear Markets
Another option to help investors work through these challenges is to hire a professional that can help build a portfolio that incorporates all of the above.
Clients of our firm access investments that extend beyond the stock market in an effort to improve diversification, and momentum-based strategies designed to help mitigate volatility. To the degree a client has concerns, our advisors are available to talk through current market conditions to help separate signal from noise.
Moments of stress can be discussed with the help of a counselor that understands your situation, the market, and how your portfolio may react given possible outcomes.
Experience Can Help Navigate Bull and Bear Market Cycles
Bull and bear markets are part of the natural rhythm of investing. The future offers both promise and peril, but the long-term trajectory of markets remains upward. Staying informed, maintaining perspective, and working with a trusted advisor can help you navigate uncertainty and make confident decisions.
Market cycles are inevitable, but they don’t have to derail your plans. A comprehensive periodic review of your total resources, that assesses the impact of a range of market outcomes relative to your needs, can help alleviate short-term thinking and over-reaction to current events.
If you’re interested in our take on your situation, please always feel free to reach out to us.
Disclosure:
Halbert Hargrove Global Advisors, LLC (“HH”) is an SEC registered investment adviser with its principal place of business in Long Beach, California. HH may only transact business in those states in which it is registered, notice filed, or qualifies for an exemption or exclusion from registration or notice filing requirements. Registration does not imply a certain level of skill or training. For information pertaining to the registration status of HH, please contact HH or refer to the Investment Adviser Public Disclosure web site (www.adviserinfo.sec.gov). Additional information about HH, including our registration status, fees, and services can be found at www.halberthargrove.com.
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