Navigating Bull and Bear Markets: Tips for Retail Investors

1. Quick definitions of bull market and bear market

First, the basics. A bull market is a period when prices are rising or expected to rise. Think of a bull thrusting its horns up - that’s the upward motion. In stocks, it often refers to a sustained increase of 20% or more from a recent low. It’s characterised by optimism, investor confidence, and strong demand.

A bear market is the opposite. A period of falling prices (20% or more down from a peak). Picture a bear swiping its paws downward - that’s the image for falling markets. Bears come with pessimism, fear, and often a pullback in spending and investing.

These aren’t short one-day drops. Typically, a bear market lasts for months or longer, and similarly for bulls. They can refer to the whole market (e.g. the ASX200 index) or a specific sector (tech stocks could be in a bear while the overall market is bullish).

But beyond definitions, here’s the reality: bulls and bears are named after the fact. No one rings a bell and says “the bull market starts today.” It’s declared after substantial moves.

2. How long do bulls and bears last?

You might be wondering, on average, how long do these phases go on? History gives us some clues:

• Bear markets tend to be shorter and sharper. The average bear market since World War II lasted about 11 months​ (some even shorter), with an average drop of around 30 - 40%​. They’re painful but relatively brief.
• Bull markets are usually much longer and gentler in rise. The average bull market lasts multiple years. Around 4-5 years isn’t uncommon​. One study noted the average bull run is ~965 days (~2.6 years) vs average bear ~289 days​. And bulls gain a lot: an average bull market might see stock prices increase 100%+ over its duration, whereas bears might drop ~ -35% on average. In fact, the average bull market sees a 150-180% total rise. That’s why the market tends to make higher highs over the long term despite occasional bears.

Why do bulls last longer? Because economic growth and corporate earnings generally trend upward over time as population, productivity, and innovation expand. Bears are often triggered by shocks or imbalances (recessions etc.), but those eventually resolve and growth resumes.

3. What bull and bear markets mean for investor psychology

Humans are emotional about money, and these cycles can trigger greed and fear big time.

In a bull market, confidence is up. You’ll see more optimistic headlines, maybe even euphoria toward the late stages (think about the crypto/NFT mania of 2021 – a kind of bull market fever in that segment). Investors often become complacent, thinking stocks only go up. New investors pile in, sometimes without much research. During long bulls, you might notice your risk tolerance increasing; you get used to every dip recovering and might take on more risk.

In a bear market, the mood turns gloomy. Fear can set in when portfolios are down 20%+ and the media talks about recessions and crashes. Common psychology: folks check their balances obsessively, consider selling everything to “stop the bleeding,” and some sell off stocks entirely. The feeling of loss is about twice as powerful psychologically as the joy of gains, according to behavioral finance studies. So a bear market can feel really terrible, even though objectively you might have only given back a year of gains.

Being aware of these emotional pulls is half the battle. Two measures of sentiment are the S&P/ASX 200 VIX index (for ASX) and the Fear & Greed Index (for the US). Often, extreme greed readings happen near market tops, and extreme fear near bottoms.