refining definition of a bull and bear market

Discuss all general (i.e. non-personal) investing questions and issues, investing news, and theory.
Post Reply
Topic Author
capran
Posts: 123
Joined: Thu Feb 18, 2016 10:45 am

refining definition of a bull and bear market

Post by capran »

I used to think that a bull or bear market was defined as a sustained (2 quarters or more) of a 20% rise (bull) or fall (bear) of a market index, as measured from the high or low point of said market. By my figures, the past bull market of the S&P began on 3/9/2009 when the market hit 676.53 and ended at 3386.15 on 2/19/2020. By my computation, it lasted 131.33 months and was up 400.5, and places it solidly in the #2 bull market in terms of longest and greatest. The number one spot still belongs to the 12/4/87 to 3/24/00 bull, which rose 582% (from 223.92 to 1527.46). so that seems an easy calculation. Where I am confused is how the recent decline and rise to new highs plays out. If the high on February 19,2020 was 3386.15, and the low on March 23,2020 was 2237.40, that is a decline of 30.7%, but does the duration of just a little over a month count toward it being the end of the bear market and the start of a new bull market, even though it's duration was so short? Just trying to reconcile my earlier faulty understanding of bull and bear to include shorter durations of 20+% increases and decreases, with no regard to duration.
User avatar
arcticpineapplecorp.
Posts: 6212
Joined: Tue Mar 06, 2012 9:22 pm

Re: refining definition of a bull and bear market

Post by arcticpineapplecorp. »

capran wrote: Tue Sep 08, 2020 11:27 am I used to think that a bull or bear market was defined as a sustained (2 quarters or more) of a 20% rise (bull) or fall (bear) of a market index, as measured from the high or low point of said market. By my figures, the past bull market of the S&P began on 3/9/2009 when the market hit 676.53 and ended at 3386.15 on 2/19/2020. By my computation, it lasted 131.33 months and was up 400.5, and places it solidly in the #2 bull market in terms of longest and greatest. The number one spot still belongs to the 12/4/87 to 3/24/00 bull, which rose 582% (from 223.92 to 1527.46). so that seems an easy calculation. Where I am confused is how the recent decline and rise to new highs plays out. If the high on February 19,2020 was 3386.15, and the low on March 23,2020 was 2237.40, that is a decline of 30.7%, but does the duration of just a little over a month count toward it being the end of the bear market and the start of a new bull market, even though it's duration was so short? Just trying to reconcile my earlier faulty understanding of bull and bear to include shorter durations of 20+% increases and decreases, with no regard to duration.
is there a reason to even worry about this?
i.e., is it actionable and if so, how/why?

this is one investment company's idea that might answer your question (but there's no one definition I believe):

Image

https://www.invesco.com/us-rest/content ... =investors
It's "Stay" the course, not Stray the Course. Buy and Hold works. You should really try it sometime. Get a plan: www.bogleheads.org/wiki/Investment_policy_statement
magicrat
Posts: 1069
Joined: Sat Nov 29, 2014 7:04 pm

Re: refining definition of a bull and bear market

Post by magicrat »

I think these are arbitrary terms with arbitrary definitions. Feel free to define them any way you want. Why does it matter?
User avatar
firebirdparts
Posts: 1801
Joined: Thu Jun 13, 2019 4:21 pm

Re: refining definition of a bull and bear market

Post by firebirdparts »

I don't see the utility of recognizing that such a thing occurred. maybe there is one. It seems to me just something for semantic arguments on the internet.

If you believe in some sort of mythology where identifying bull or bear markets gives you the ability to time the market, then yeah, I could see that definition becoming important.

Based on "how it is" i do think we are in the euphoria phase, which suggests that no bear market occurred (yet). I know I can't time the market by that, though. I'm not about to get into a semantic argument on the internet. That's the second most well-known Classic Blunder, right after "Never get involved in a land war in Asia"
A fool and your money are soon partners
SchruteB&B
Posts: 363
Joined: Mon Jul 02, 2018 7:48 am

Re: refining definition of a bull and bear market

Post by SchruteB&B »

I think it is somewhat amusing to act as though this type of thing can be done with precision. Is there really and truly any difference between the market being down 20% and the market being down 19.4% as it was in 2011?
flaccidsteele
Posts: 1021
Joined: Sun Jul 28, 2019 9:42 pm
Location: Canada

Re: refining definition of a bull and bear market

Post by flaccidsteele »

There’s no benefit to redefining bull and bear imo

I use the conventional definition because I don’t follow financial news very closely, so when the media screams that we’re in a bear market, I know what they mean and can wake up and start increasing my buys

If it weren’t for the media, it would be tough for me to know if we were in a bear
The US market always recovers. It’s never different this time. Retired in my 40s. Investing is a simple game of rinse and repeat
User avatar
nisiprius
Advisory Board
Posts: 42002
Joined: Thu Jul 26, 2007 9:33 am
Location: The terrestrial, globular, planetary hunk of matter, flattened at the poles, is my abode.--O. Henry

Re: refining definition of a bull and bear market

Post by nisiprius »

A lot of the nonsense things that are written about bull and bear markets seem to me the goal of making bear markets look not-so-bad. That is, to market stocks to people with low risk tolerance by convincing them that stocks aren't so risky.

Recently, for example, I've noticed a tendency to talk about the number of years from bottom to recovery rather than the total number of years from beginning to end. I see no obvious justification for this other than to cut the number roughly in half.

Definitions are slippery. For example, by most reasonable measures, after 1929 the market had in fact recovered by the end of 1936--but only just barely and only for three months. There was a three month window of opportunity within which it was possible to sell and avoid a loss. But then the Recession of 1937 arrived, and with it a -50% drop just as bad as 2008-2009 and lasting longer. In the words of Frederick Lewis Allen in Since Yesterday,
When it came, it came fast--and apparently out of a clear sky. Toward the end of August, 1937, the stock market sold off and business showed signs of slackening. After Labor Day the retreat became sharper. Stocks went down fast and far. On the morning of October 19 the market seemed near demoralization, with support for some stocks apparently quite lacking and selling orders pouring in from all over the country; the tape lagged twenty-five minutes behind the trading, and when at last the gong rang for the closing, the total of transactions had come to 7,290,000 shares--the biggest total since the collapse of the New Deal Honeymoon bull market in the summer of 1933. All through the autumn of 1937 the decline continued. Only the fact that speculation previous to August had been moderate and well-margined, with the SEC watching carefully to prevent manipulation, kept the annihilation of values from having disastrous consequences outside the exchanges. Meanwhile business operations contracted steadily and rapidly. Not until the end of March, 1938, did the stock market touch bottom; not until May did business do so. Never even during the collapse of 1929-32 had the industrial index shrunk at such a terrific rate.
In other words, the period from 1929 through 1944 is usually counted as two separate bear markets of about 7 years each, and that's fair scoring. But if the recovery at the end of 1936 had fallen short by just a tiny amount, it couldn't have made much difference in anything real; but it would have been counted as a single 15-year bear market.

As a result, when people talk about the "average length of a bear market" they are averaging a list with two 7's on it, pulling the average toward 7. But if history had been just a hair difference, the list would include a 15.

The starting date for the Invesco chart can be justified by interpreting "S&P 500" in the strict sense: the S&P 500 index began in 1957. But it does have the effect of excluding the crash of 1929 and the recession of 1937.
Annual income twenty pounds, annual expenditure nineteen nineteen and six, result happiness; Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.
Topic Author
capran
Posts: 123
Joined: Thu Feb 18, 2016 10:45 am

Re: refining definition of a bull and bear market

Post by capran »

My bad, I guess, for trying to make sense of a list of bull and bear markets I came across and if that list was indeed semi accurate, and how the last entry on the bull market was not yet completed (the date was long before we reached the highs.). I guess it has about as much value as reading a prospectus, which seems often dated in such a way that it includes large market moves up, but often seemingly dated to exclude large downturns. thank you all for your perspectives.
User avatar
arcticpineapplecorp.
Posts: 6212
Joined: Tue Mar 06, 2012 9:22 pm

Re: refining definition of a bull and bear market

Post by arcticpineapplecorp. »

capran wrote: Tue Sep 08, 2020 2:50 pm My bad, I guess, for trying to make sense of a list of bull and bear markets I came across and if that list was indeed semi accurate, and how the last entry on the bull market was not yet completed (the date was long before we reached the highs.). I guess it has about as much value as reading a prospectus, which seems often dated in such a way that it includes large market moves up, but often seemingly dated to exclude large downturns. thank you all for your perspectives.
I think reading a prospectus has value. if you don't read it, you really don't know what you're invested in. How else would you determine what you're invested in? By the fund's name? What does the fund names tell you:

Hancock Horizon Burkenroad D (BULLX)
Roosevelt Anti-Terror Multi-Cap (BULLX)
Ameritor Investment (AIVTX)
The Congressional Effect Fund (CEFFX)
The Herzfeld Caribbean Basin Fund (CUBA)
The Marketocracy Masters 100 Fund (MOFQX)
The Monetta Young Investor Fund (MYIFX)
The Adaptive Allocation Fund (AAXCX)

not reading the prospectus also means you're not aware of the risks of the fund you're invested in. You may not know the costs also. The prospectus is the contract essentially that you're signing that says you understand and accept the risks and potential rewards of where you're putting your money.

ever talk to someone who regrets buying something but didn't do any research beforehand?

listen to financial talk shows. people call all the time asking "How do I get out of this whole life (or indexed annuity) policy?" They often admit rather sheepishly they didn't understand what they put their money into. They bought first and asked questions later. That's the wrong order, clearly.

Because they either didn't read the contract or didn't understand it. No problem if you don't understand it, don't invest in what you don't understand. But if you invest in something without doing your due dilligence, you don't know what you don't know and only have yourself to blame.
It's "Stay" the course, not Stray the Course. Buy and Hold works. You should really try it sometime. Get a plan: www.bogleheads.org/wiki/Investment_policy_statement
Exchme
Posts: 36
Joined: Sun Sep 06, 2020 3:00 pm

Re: refining definition of a bull and bear market

Post by Exchme »

SchruteB&B wrote: Tue Sep 08, 2020 12:45 pm I think it is somewhat amusing to act as though this type of thing can be done with precision. Is there really and truly any difference between the market being down 20% and the market being down 19.4% as it was in 2011?
Plus the wicked little swoon at the end of 2018 that was 18%. Market moves come in all shapes and sizes. "Bull" and "Bear" are just media creations. Since they are only visible only after the fact, there is no actionable information contained in the labeling.
MotoTrojan
Posts: 10659
Joined: Wed Feb 01, 2017 8:39 pm

Re: refining definition of a bull and bear market

Post by MotoTrojan »

I think we are in a butterfly market.
Post Reply