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Bull market doesn't mean bear market is definitely on horizon

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Kendall W. King is CEO of Castleview Wealth Advisors and author of the book “Abundance.”

Kendall W. King is CEO of Castleview Wealth Advisors and author of the book “Abundance.”

Bull market doesn't mean bear market is definitely on horizon

Q: What is a bull market and how does it differ from a bear market?

A: The term “bull market” is used to refer to a rising stock market; however, it can also be applied to other securities such as bonds or commodities. Generally, stocks are considered to be in a bull market when they gain more than 20 percent of their value. This is the opposite of a “bear market,” which refers to a falling stock market. A bear market is simply a decline of 20 percent in stocks from the previous bull market closing high.

Q: What does history tell us about how long a bull market usually lasts?

A: The last time stocks rose this consistently was between late 1987 and 2000. The present stock bull market, which started back in March 2009 after the U.S. financial crisis, has been running for about nine and a half years, slightly longer than average run of about nine years. Going back to 1926, there have been four bull markets that have lasted longer than this one, so we are not in an unprecedented stock market.

Q: When will this bull market end? Should we expect a downturn soon?

A: Unfortunately, there is no crystal ball that will tell us when this bull market will end. It's important to understand that stocks, despite the short-term fluctuations, will trend higher and higher over long periods of times. History tells us bull markets tend to end when fueled by too much optimism among investors, such as we saw in the late 1990s with the technology bubble. This doesn't appear to be the case in our current market as there is still plenty of investor pessimism.

Q: Should I make any changes to my investment plan?

A: It's natural for investors to fear a downturn after such a long period of rising markets. The fact that the U.S. has experienced a bull market for so long does not automatically mean a bear market is on the horizon. You can take comfort in knowing that bear markets are historically much shorter than bull markets, averaging only about 16 months in length. As an investor, you should recognize that disciplined long-term investing isn't about timing the next bear market. Rather, it's about staying invested in a diversified portfolio that you can remain in throughout all market environments.

PAULA BURKES, BUSINESS WRITER

Paula Burkes

A 1981 journalism graduate of Oklahoma State University, Paula Burkes has more than 30 years experience writing and editing award-winning material for newspapers and healthcare, educational and... Read more ›

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