Tom Explains the Difference in a Bear vs a Bull Market
Transcript:
Katie Nealis: So Tom, in your office, you have a few statues of bears and bulls fighting. Can you explain what a bear market versus a bull market is?
Tom Vaughan: Yeah, I’ve always found that kind of interesting because you know, you’re supposed to like one, you know, in which one do you like? Do you like the bear? I don’t know. You know, that seems kind of scary. Do you like the bull? That seems kind of scary. But you should like the bull, because that’s the upmarket thing. Let me share my screen, actually, I can share show you sort of a long term view here. So this is the S&P 500. For the last 25 years, each one of these little boxes is a month, but it gets a chance to see a lot of data. And so here you can see the 2000 downturn, right, so about 45% drop from high to low and the S&P, here’s the 2008 downturn about 53% drop. So those are both bear markets and a bear market is defined in in essence, as a 20% or more drops are both of those where here’s at the end of 2018, this doesn’t look like much, but this was right at 20%. So very close to being what they consider a bear market. And of course, here’s the pandemic, which, you know, we forget how bad that was, that was the fastest 35% drop in history. So that’s a bear market also.
So a bull market is just the opposite is the upward moving market. The definition for a bull market, though, isn’t as well defined, some people call it a 20% increase, you know, just like the opposite of a bear with a 20% decrease. I tend to use that also. But I also use this 200 day moving average, this blue line that I have here is the every point on this line is the average of 200 days prior and so when that turns up you can see here that usually means to me things are moving in a bull market direction and that’s when I’ll usually start to get more aggressive if that’s what I’m doing. So I mean, that’s in essence that’s what that is.
So again, you know, bear is bad down bull is good up, you know, so that helps but yeah, it’s it’s it’s I’ve been asked that a few times. I do have these little statues in my office that I really like but with a kind of bear and bulls, you know, wrestling and what have you.