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.
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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.
How Do Bullish and Bearish Markets Work?
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.
How Long Do Bullish and Bearish Markets Last?
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.”
Bearish markets use that same 20% threshold to determine when they take place. “A bearish market is the inverse of the bullish market characteristics described above. It can generally be defined as a decline of 20% in asset prices from the previous peak,” Spinelli explains.
Bullish markets can continue indefinitely until the market experiences a 20% drop from the all-time high. After a market becomes bearish, asset prices must gain 20% from the all-time low to be treated as bullish.
Therefore, a broader financial market does not have to return to its all-time high to go from a bearish market to a bullish market.
The lengthiest bear market on record took place during the Great Depression. The Dow Jones Industrial Average lost 89% of its value from 1929 to 1932 amid grueling market conditions.
The bear market during the Great Depression stands in sharp contrast to the pandemic-fueled bear market that took place in 2020. The latter bearish market only lasted a few weeks until the Federal Reserve rolled out the money printer.
The Signs of Bullish and Bearish Markets
Not every bullish and bearish market is the same, but they follow patterns. These markets have several elements that investors can pick up before others notice.
Asset prices go up during bullish markets, and those upward movements are largely fueled by robust earnings, a strong economy and increases in consumer spending. Investors tend to feel more confident during bullish market rallies.
Declining earnings and consumer spending lead to bearish markets. Investors start to feel less confident about investments and may sell off their positions.
Economic data, such as changes in inflation and employment rates, also contribute to bearish and bullish markets. Higher interest rates slow down the economy, while interest rate declines translate into economic growth due to lower borrowing costs.
Investors are forward-looking, and they may start buying shares before bearish markets turn into bullish ones. Investors think about what the economy can look like in a few months and adjust their portfolios accordingly. Some accumulate shares during periods of high fear and look smart afterward. Investors can also look savvy when they sell stocks during periods of high greed, but timing is key.
Most investors get the timing wrong, and it’s better to take a long-term perspective than it is to hope you can be the statistical anomaly who correctly times the market. But knowing the signs of bullish and bearish markets can help investors make better decisions that align with their financial goals.
Navigating Bullish and Bearish Markets
Bullish and bearish markets are common components of investing in assets. Knowing that assets tend to go up during bullish markets and fall during bearish markets isn’t enough to make savvy decisions. It’s also important to know how these markets tap into human psychology and create vulnerabilities.
“FOMO (fear of missing out) usually takes hold in bullish markets, where investors overestimate their tolerance for risk and begin deviating from their plan to chase returns,” Spinelli explains. “It takes discipline to not give into those feelings and deviate from a plan.”
If a stock more than doubles in a few weeks, it’s tempting to jump on board with every other investor. Dramatic gains can cause investors to ignore valuations, financials and other key fundamentals. This deviation from the criteria can lead to unpleasant surprises, such as the ones investors experienced from 2021 to 2022.
The stock market performed well in 2021, and many winning stocks more than doubled. Many of those same stocks crashed in 2022 after the FOMO died down and investors looked at valuations.
Stocks largely recovered in 2023, but similar dynamics have played out in the current bull market. The artificial intelligence boom has led to outperformance and sky-high valuations for several mega-cap tech and semiconductor stocks, but investors occasionally chafe at the massive capital spending on AI-related projects that have yet to turn a profit and sell their shares. Some analysts believe a new bear market could be around the corner, but the “AI bubble,” such as it exists, has yet to burst as of mid-2026.
Bullish markets can lead to significant FOMO, but what about bearish markets? These market cycles also play a role in consumer psychology.
“In bearish markets, the flight to safety occurs, and typically after markets have moved down,” Spinelli says. “If investors set proper time frames when investing in assets that can fluctuate a lot in value, they generally have better odds for positive returns than trying to time the market moves year to year. Rarely do investors complain about the higher rates of returns from bullish markets. It’s the bearish markets where their real tolerance for risk shows up.”
Investors frequently talk about financial goals and risk tolerance. Smaller corporations with high revenue growth may seem attractive during bullish markets, for example, and investors may think that these riskier stocks can give them a boost toward their goals. But these same stocks become more vulnerable during bear markets and test the resolve of their investors.
Some investors exit too early during bearish markets and do not return to the stock market until the next bullish market has been established. FOMO during bullish markets and fear during bearish markets can create a toxic cycle of buying high and selling low.
Holding on to long-term investments with appropriate time horizons can mitigate these risks.
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Bullish vs. Bearish: What’s the Difference? originally appeared on usnews.com
Update 07/16/26: This story was previously published at an earlier date and has been updated with new information.
