We hear a lot about bull markets versus bear markets, but what does that mean? And perhaps more importantly, what does it mean for investors?
Essentially, the descriptions reflect general market conditions: A bull market is appreciating in value and reflects a stronger economy and more optimistic investors; conversely, a bear market is depreciating, resulting in lower returns and a slowing economy.
But an historical review by Aviso Wealth has offered some interesting take-aways, notes David Dalton, Private Wealth Advisor with Coastal Community Private Wealth Group in the Comox Valley and Investment Advisor with Credential Securities.
First, bull markets are longer and stronger than bear markets. “Looking at the history of U.S. stocks from 1960 through 2021, for example, the median duration of bull markets was 53 months, while the median length of a bear market was just 13 months,” Dalton says.
“Evidence clearly favours the bulls, with periods of rising stock prices, or ‘bull’ markets, typically lasting roughly four times longer than periods of falling prices, or ‘bear’ markets.
This is important for investors to know, especially at times when markets and the economy seem to be slowing. The same Aviso Wealth chart shows median gains from those bull markets at 105 per cent, compared to the median loss of 33 per cent from bear markets over that same period.
The bottom line
When comparing periods of rising and falling markets, rising markets have historically:
- Lasted longer
- Been more frequent
- Produced gains that are more than enough to offset losses
“When markets decline, investors may understandably be concerned, but it’s important to remember that bear markets are part of the market’s natural cycle and historically have had limited durations,” Dalton notes.
That means that having patience with your investments following steep market declines will increase the likelihood of achieving long-term success. Why? Investors who reacted to these bear markets by selling their investments, missed out on the substantial market rallies – or bull markets – that followed.
“While accurately predicting the ups and downs of the market is virtually impossible, maintaining focus on your long-term investment objectives and will help you stay focused on the finish line, not unforeseen hurdles along the way.”
Learn more about your investment options, contact David Dalton in the Comox Valley.
Mutual funds and other securities are offered through Credential Securities, a division of Credential Qtrade Securities Inc. Credential Securities is a registered mark owned by Aviso Wealth Inc. Credential Securities is wholly-owned subsidiary of Aviso Wealth Inc. Coastal Community Private Wealth Group is a division of Coastal Community Financial Management Inc.(CCFMI), offering financial planning, life insurance and investments. CCFMI is a licensed life insurance agency and a wholly-owned subsidiary of Coastal Community Credit Union. The information contained in this report was obtained from sources believed to be reliable; however, we cannot guarantee that it is accurate or complete. This report is provided as a general source of information and should not be considered personal investment advice or a solicitation to buy or sell any mutual funds and other securities.