Bull vs bear markets – what they mean for your money

A bull market is when share prices are rising, typically by 20% or more from a recent low. It can usually be seen in times of optimism, strong economic growth, and investor confidence. Think of a bull thrusting its horns upward – that’s how asset prices behave.

Example:
After the 2008 financial crisis, the stock market entered a bull phase that lasted over a decade. Investors who stayed invested during this time saw significant growth in their portfolios. From 2009 to early 2020, the US S&P 500 Index rose by more than 400%.

A bear market is when prices fall, by 20% or more from a recent high. It’s often triggered by economic downturns, rising interest rates, or global conflict or a health crisis. Investors may feel anxious, and selling pressure increases.

Example:
In early 2020, the COVID-19 pandemic caused a sharp bear market. The S&P 500 Index dropped nearly 34% in just over a month in US dollars. But it rebounded quickly, showing that bear markets, while painful, are often short-lived compared to bull markets. 

While no one can predict markets with certainty, there are signs that can suggest whether we’re entering a bull or bear phase. 

In a bull market, you’ll often see rising stock prices, strong corporate earnings, low unemployment, and high consumer confidence. 

On the other hand, a bear market may be signalled by falling share prices, an economic slowdown, rising interest rates. 

Analysts also watch indicators like inflation trends, and central bank policy. For example, when interest rates and energy costs rise as they did in 2022, markets often react negatively, which can lead to a bear market.

Whether the market is bullish or bearish, your long-term goals matter most. Here’s how to stay on track:

• Stay invested: Timing the market is tough – even experts can struggle. Staying invested can help you benefit from long-term growth.
• Diversify: Spread your investments across different types of investments, sectors, and/or regions to reduce risk. Multi-asset solutions and strategies that invest in both equities and bonds can be a great way to add variety to your portfolio.
• Use pound-cost averaging: Invest a fixed amount regularly. This can help smooth out market ups and downs, and can take out some of the emotion and uncertainty that comes with choosing when to invest. 
• Think long-term: Bull and bear markets come and go. But staying invested over the longer term of 5 years or more gives your money a better chance to grow.