Bull markets vs. bear markets
Bull markets vs. bear markets
Neither is an animal you’d want to run into on a hike, but the market has picked the bear as the true symbol of fear: A bear market means stock prices are falling — thresholds vary, but generally to the tune of 20% or more — across several of the indexes referenced earlier.
Bull markets are followed by bear markets, and vice versa, with both often signaling the start of larger economic patterns. In other words, a bull market typically means investors are confident, which indicates economic growth. A bear market shows investors are pulling back, indicating the economy may do so as well.
The good news is that the average bull market far outlasts the average bear market, which is why over the long term you can grow your money by investing in stocks.
The S&P 500, which holds about 500 of the largest stocks in the U.S., entered bull market territory in October 2022 following a bear market that started in June of that year. The index saw a massive recovery in 2023 and hit a fresh all-time high in May 2024.
But the index has historically returned an average of about 7% annually, when you factor in reinvested dividends and adjust for inflation. That means if you invested $1,000 30 years ago, you could have about $7,600 today. (Explore this further with NerdWallet's investment calculator.)