Since the start of 2022, the markets have been on a wild rollercoaster ride. After hitting a new all-time high on the third day of 2022, the S&P 500 endured a long winter, allergic to a new market high for more than two years. During that swoon, stocks lost a quarter of their value at their lows. Ouch!

But those losses now feel like a distant memory. Why? Because after finally reaching a new high in early January this year, the S&P 500 recorded 22 new all-time highs in the first quarter of 2024 alone! This remarkable recovery happened despite sticky inflation, geopolitical tensions, and an upcoming presidential election. So, as summer heats up, should investors be feeling bullish or bearish? Before you decide, understanding the potential benefits of each in the long run might be helpful.

The Pain of Bear Markets

A bear market is defined as a 20% drop from a previous high. Over the past century, we’ve seen 14 bear markets, each lasting an average of 20 months and seeing stocks swoon by 40%. The bear market of 2022 seemed mild in comparison given it lasted nine months with “only” a 25% market decline.

The Rewards of Bull Markets

On the other hand, the average bull market over the past 100 years has lasted 51 months with a staggering 162% return.¹ If the current bull market were to follow this pattern, it would extend until January 2027. Want the better news? Stocks in the current bull market have risen “only” 47% since October 2022, suggesting there’s still plenty of room for growth compared to historical averages.

Did You Know? 

Wall Street coined the term “bull” market for a surging stock market because bulls charge. Meanwhile, a declining market was given the moniker “bear” market because bears hibernate.

Navigating Market Highs and Lows

It’s easy to paint the portrait of a nervous Nellie investor when the market is hitting new all-time highs, especially with concerns about inflation, geopolitical issues, and upcoming elections. When it comes to investing, you never have to look long or far to find a Chicken Little forecasting market doom. 

The lesson of investing amid bull and bear markets is reminiscent of parenting advice that’s stuck with me regarding feeling angry versus acting angry. It’s natural for investors to feel bearish – you can always find a reason to feel that way. Yet, acting bearish or selling stocks isn’t the best solution for investors looking to achieve their financial goals over the long run. The importance of managing our emotions is easy to say and hard to do. It’s why looking at our portfolio less can pay huge dividends.

Market fluctuations are a normal part of investing. While enduring bear markets and getting worried after new all-time highs are tough, they are the price of admission for the chance to participate in long, profitable bull markets. The real risk lies in missing out on these lucrative periods by reacting too quickly to downturns or too much good news. Staying invested through the ups and downs is key to achieving your long-term financial goals.

Castle Quote: “The desire to perform all the time is usually a barrier to performing over time.” — Robert Olstein