Bull vs Bear Market: What Investors Need to Know

Bull or bear markets can affect how your portfolio performs in the short term

By Rachel Warren – Updated Aug 14, 2025 at 8:04 PM EST | Fact-checked by Parker Hicks

Key Points

Bull markets last longer than bear markets, providing extended growth opportunities.
Bear markets are shorter and can offer good investment entry points.
Investing steadily through market cycles historically yields significant gains.
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The term "bull vs bear market" is spouted by almost every financial media outlet, but what does it actually mean? A bull market occurs when the economy is expanding and the stock market is gaining value; a bear market is in effect when the economy is shrinking and stocks are losing value. Both types of markets can have massive effects on both your portfolio and your investment strategy.

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A graphic comparing a bull vs. bear market, with a bull market indicating optimism and a bear market indicating pessimism. — Image source: The Motley Fool.

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The most recent bear market occurred in 2025, following the very short bear market of 2022. The 2025 bear market lasted approximately four months. Looking at each of the major indices in the U.S., the Dow Jones Industrial Average entered a bull market in November 2022, followed by the Nasdaq Composite Index in May 2023 and the S&P 500 in July 2025, with all indices dropping into a brief bear market in the spring of 2025.

The chart below illustrates the performance of these three major indexes from the time the bear market began in early 2022 to the time of this article.

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generate_fund_chart — Market data by YCharts.

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Stock market performance

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 depressed prices.

Change in GDP

Rising GDP denotes a bull market, while falling GDP correlates with a bear market. GDP increases when companies' revenues increase and employee pay rises, which enables increased consumer spending. GDP decreases when companies' sales are sluggish and wages are stagnant or declining.

Bear markets are closely linked with economic recessions and depressions. Recessions are formally declared when GDP decreases for two consecutive quarters, while depressions occur when GDP decreases by 10% or more and the downturn lasts for at least two years.

Unemployment rate changes

A declining unemployment rate is consistent with a bull market, while a rising unemployment rate occurs during a bear market. During bull markets, businesses are expanding and hiring, but they may be forced to lower their headcounts during bear markets. A rising unemployment rate tends to prolong a bear market since fewer people are earning wages, which results in reduced revenue for many companies and in turn, more people selling shares or not buying into companies.

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Rate of inflation

Price inflation may be a problem when the economy is booming, although inflation during a bear market can still occur. High demand for products and services in bull markets can cause prices to rise, and shrinking demand in bear markets can trigger deflation.

Prevailing interest rates

Low interest rates typically accompany bull markets, while high interest rates are associated with bear markets. Low interest rates make it more affordable for businesses to borrow money and grow, while high interest rates tend to slow companies' expansions and new companies are forced to slow down or stop.

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About the Author

Rachel Warren is a contributing Motley Fool stock market analyst covering pharmaceuticals, biotechnology, medical devices, information technology, and consumer goods. Prior to The Motley Fool, Rachel was a paralegal and legal administrator. She holds a bachelor’s degree in paralegal studies from Liberty University School of Law.

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