Bull and Bear Markets in the Stock Market
This year, the S&P 500 index has risen by 15.3%, including dividends. While this is an impressive performance, the bull market has been relatively quiet. There were only 14 days when it rose more than 1%, and only one day when it rose more than 2%. At the same time, there were only 7 trading days when it fell more than 1%. This gradual increase is a typical feature of bull markets.
The Appeal of Steady Gains in Bull Markets
Bull markets may not make for exciting news because they tend to rise steadily and systematically. For instance, the bear market in 2022 was highly volatile. The S&P 500 index fell more than 1% on 63 trading days, more than 2% on 23 days, and more than 3% on 8 days. Simultaneously, it rose more than 1% on 59 days.
Bear Markets: Dynamic Volatility
Bear markets are characterized by a mix of significant down days and up days. Consider the pandemic crash of 2020. The second-best day, with a +9.3% gain, was sandwiched between the worst days of -9.5% and -12.0%. This highlights the stock market’s potential for significant volatility driven by emotional swings. Therefore, statistics showing returns if you missed the top 10 days are not very meaningful.
Understanding as a Long-Term Investor
As a long-term investor, it’s important to understand the characteristics of bull and bear markets. The stock market shows great volatility when emotions run high, making it crucial to stay calm during such times. For example, while the S&P 500 index rose over 15% this year, 134 stocks fell by more than 5%, and 85 stocks fell by more than 10%.
Conclusion: Success in Investing Lies in Steadiness
According to JP Morgan’s data, many stocks can fall even in a good year for the stock market. This shows that bull markets are not always thrilling. However, the stock market always has the potential for volatility. The key is to invest consistently and watch for long-term growth.
Don’t miss the excitement of the stock market. Significant volatility and opportunities can arise at any time.
Reference: A Wealth of Common Sense, “How Bull Markets Work”