A bear market rally is when the stock market posts gains for days or even weeks. It can easily trick many investors into thinking the stock market trend has reversed, and a new bull market has begun. But nothing in nature or the stock market moves in a straight line. Even with a normal bear market, there will be days or months when the trend is upward. But until it moves up 20% or more, it is still in a bear market.
Secular Bear Market
Regular bear markets are called cyclical bear markets. A secular bear market lasts anywhere between five and 25 years. The average length is around 17 years. During that time, typical bull and bear market cycles can occur. But asset prices will return to the original level. There is often a lot of debate as to whether we are in a secular bull or bear market. For example, some investors believe we are currently in a bear market that began in 2000.
How to Invest
You can prepare for a stock bear market by decreasing the risk in your portfolio. For example, you can increase the amount of cash and reduce the number of growth stocks. You can also select mutual funds that perform better in a bear market. These include gold funds and sector funds focusing on health care and consumer staples.
During a bond bear market, individual bonds are safer than bond funds. Their interest rates and payments are fixed. If you hold onto the bond, you will receive the promised amount. In bond funds, you could lose money when the manager sells the bonds within the fund.