Bull versus Bear Markets: What’s the Difference? | American Funds

Investing Fundamentals

January 2019

Bull vs. Bear Markets: Knowing the Difference Can Make You a Better Investor

Are we in a bull market, or has it become a bear? And why do we use those terms to describe the stock markets, anyway?

One popular belief is that the terms are based on the animals’ styles of attack. While a bull attacks by thrusting its horns up, a bear attacks by swiping its paws down. These can be likened to market direction, since markets move up, down and sideways.

In bull markets, prices trend up as financial markets show optimism. In bear markets, prices trend down as financial markets show pessimism. Stagnant markets are a result of continual ups and downs, where market gains cancel losses. On average, bull markets have lasted for eight years with annualized returns of 19% and bear markets have lasted for less than two years with annualized returns of -25%.*

bear-bull-infographic

Market cycles inevitably include both bull and bear markets. In fact, the exact length and scope of these markets is never clear until after the fact. In hindsight, trying to time these cycles consistently is impossible. As a mutual fund company, Capital Group has navigated various markets cycles for more than 85 years. Based on our experiences, below are a few tips to help you develop a plan of attack to boost your confidence in all types of markets:

  • Create an investment plan and stick to it through ups and downs.
  • Diversify your assets in a variety of investments to help provide resilience during downturns.
  • Invest for the long term, rather than chasing short-term trends.

 

 

*Source: Newfound Research, "Anatomy of a Bull Market," February 2017


Investments are not FDIC-insured, nor are they deposits of or guaranteed by a bank or any other entity, so they may lose value.

Investors should carefully consider investment objectives, risks, charges and expenses. This and other important information is contained in the fund prospectuses and summary prospectuses, which can be obtained from a financial professional and should be read carefully before investing. 

Certain market indexes are unmanaged and, therefore, have no expenses. Investors cannot invest directly in an index. 

This content, developed by Capital Group, home of American Funds, should not be used as a primary basis for investment decisions and is not intended to serve as impartial investment or fiduciary advice.

Past results are not predictive of results in future periods.