- A bull market is typically characterized as having a sustained increase in stock prices by at least 20 per cent over previous lows, a bear market is the reverse
- Canada’s first bull market was in 1956 lasting five months and saw an 18 percent gain.
- In November 1990 the Bull had a 160 per cent run for the longest duration of 90 months followed by a six-month, 32 percent loss
- The “economy” and the “stock market” are not interchangeable terms
A “bull” and “bear” market describes the movement of stock markets up or down; however, it is important to understand that the stock market and the economy are not the same.
The economy: The economy is a broader concept encompassing all activities related to producing, distributing and consuming goods and services within a given region or country.
Stock market: The stock market is a subset of an economy – it is a platform where individuals and institutions can buy and sell shares in publicly traded companies, bonds, funds and more.
Bull market
A bull market is typically characterized as having a sustained increase in stock prices by at least 20 per cent over previous lows. With stock prices and other assets appreciating in value, investors tend to be more optimistic and confident as they see stock markets rising.
Bull markets are typically influenced by factors such as a strong economy with low unemployment. This is when investors may profit from their investments; however, it’s important to note that bull markets are not immune to market corrections.
British investor, banker, fund manager and philanthropist Sir John Templeton in 1954 created the Templeton Growth Fund, which averaged growth of more than 15 per cent per year for 38 years. Templeton said,
“Bull markets are born on pessimism, grow on skepticism, mature on optimism and die on euphoria.”
Bear market
A bear market, on the other hand, is where an index or asset shows a period of declining prices of 20 per cent or more from previous highs. Bear markets are typically driven by economic downturns, rising interest rates and/or geopolitical uncertainty.
The good news is that, based on historical data, bull markets tend to be stronger and last longer than bear markets, meaning that periods of potential stock market gains typically outweigh periods of decline.
How do we tell if we are in a bear or bull state?
Simply put, stock prices are rising in a bull market and declining in a bear market. The stock market under bullish conditions is consistently gaining value, even with some brief market corrections. The stock market under bearish conditions is losing value or holding steady at lower prices.
Brianne Gardner, wealth manager and financial advisor with Velocity Investment Partners at Raymond James says,
“Identifying a bull or bear market involves analyzing various indicators, market dynamics, and investor behaviour. Rather than relying on a single indicator. … We closely monitor trends in indices such as the S&P500 and TSX, while also examining other indicators like VIX or gold price’s trends to gauge market volatility and potential flight to quality. “
When was Canada in a bear or bull market?
Canada’s first bull market was in 1956 lasting five months and saw an 18 percent gain. It was followed by a bear market in July 1956 that lasted 17 months, registering a decline of 30 percent.
in January of ’58 the bull went on a run for 18 months adding 39 percent. The bear followed, and was in charge for a year.
In December of 1976 the bull was in the black for four years gaining a whopping 161 per cent followed by a decline in a bear market for 19 months at 44 percent.
In November 1990 the bull had a 160 per cent run for the longest duration of 90 months followed by a six-month, 32 percent loss.
In the 2000s – June 2008 to March 2009 – the bear roared because of the subprime lending crisis, while the bullish market ran March 2020 to April 2022 because of a large liquidity injection and an extremely low interest environment.
Where are we now?
For a look at 2024’s bear or bull situation, Richard Carleton, CEO of the Canadian Securities Exchange and Gardner share their insight in, “Will we have a bear or bull market in 2024?”.
Looking back, the TSX started 2023 on a strong note by rising 3.7 per cent in the first quarter, and it has fallen sharply since then mainly because of continued high inflation and rapidly rising interest rates.
Gardner emphasizes that for short period examples, “We have been in a bear market in the previous two months,” referring to September and October 2023. “In those two months the TSX went down 7 percent with negative returns in 24 out of 41 trading days in that period. Just the opposite happened in November. In its first three weeks (ending on Nov. 17) the TSX was up 6.9 per cent with positive returns in 10 out of 15 trading days, and the trend continues.”
In September 2023, CNBC polled about 300 chief investment officers, equity strategists, portfolio managers and CNBC contributors who manage money about where they stood on the markets for the rest of 2023 and beyond. The survey revealed that 61 percent believed it was a bear market rally, and 39 per cent thought we’ve entered a new bull market.
In a CNBC Interview in late December, Jay Hatfield, CEO of investment firm Infrastructure Capital Advisors said recent economic data “validates our theory that 2024 will be the year of rate cuts, and that’s very bullish for stocks.” A decline in rates worldwide should spell a good year for markets and less of a possibility of a recession, he told CNBC.
If you are wondering how gold fits into the bear or bull situation, check out our interview with mining expert Gwen Preston.
Join the discussion: Check out the rest of Stockhouse’s stock forums and message boards.
Click here to follow the TSX and keep up to date companies and listings.
The material provided in this article is for information only and should not be treated as investment advice. For full disclaimer information, please click here.
