Bull Market, Bear Market, or 'Buffalo Market'? See How to Invest Your Retirement Savings
Do you know the difference between bull and bear markets? See how to buy stocks during volatility -- and why long-term returns could be better than you think.
Image source: Getty Images
One thing is always true about buying stocks: Sometimes stocks go up, and sometimes stocks go down. The risk of losing money in the short term is also part of why buying stocks for the long term can be so richly rewarding. If you're a patient investor and accept the short-term risks, you can likely earn a significant return on your stock investments, even if stock prices go down today, this month, or this year.
The stock market is full of buzzwords like "bull market" (when stocks go up) or "bear market" (when stocks go down). But along with the everyday ups and downs of stock prices, sometimes the stock market seems to go wandering in unexpected directions.
Marci McGregor, head of portfolio strategy at Merrill and Bank of America Private Bank, was recently quoted in CNBC with a fun new buzzword for today's unpredictable stock market: a "buffalo market."
Let's see what a "buffalo market" means for stocks, and how you can keep investing for retirement -- no matter what happens on Wall Street.
"Buffalo Market" -- roaming, wandering bull
Buffalo are majestic animals of the Great Plains, known for roaming and wandering great distances. Male buffalo are called "bulls." But a "buffalo market" doesn't behave the same as a "bull market." According to Marci McGregor from Merrill and Bank of America in an interview with CNBC, a buffalo market "might roam, it might wander in the summer months."
The stock market had some volatility this summer, including a one-day decline of 3% in the S&P 500 on Aug. 5, 2024. But the market has also come roaring back: the S&P 500 gained 8.6% from Aug. 5-Aug. 23, 2024. Just like a buffalo, the stock market can burst into action and accelerate fast, on short notice -- and you don't want to miss that momentum.
Can stocks keep going up in 2024?
McGregor told CNBC that "ultimately, what will turn the buffalo back to a proper bull is fundamentals.” Bank of America analysts expect U.S. stocks to end 2024 higher than they were in July at the time of Marci McGregor's interview with CNBC -- even if there is some short-term volatility.
No one can perfectly predict the future, of course. And past performance is no guarantee of future results. But unless the U.S. economy somehow slows down dramatically and tips into recession, or unless there is a new economic crisis that disrupts businesses, there are good reasons to believe that the U.S. stock market will keep climbing (with some unpredictable ups and downs) in the long run.
How to invest for bull markets, bear markets, or buffalo markets
It can be fun to think about the stock market being embodied by massive, powerful animals like bulls, bears, and buffaloes. But the truth about investing in the stock market is often more mundane.
Stocks go up, and stocks go down. Sometimes, the stock market suffers through a long-term downturn ("bear market"), like it did in 2022 when the S&P 500 lost about 19% of its value in one year. But at other times, the stock market goes on a "bull market" run, and stocks earn huge returns over several years.
In the long run, the overall stock market tends to go up -- companies keep innovating, earning profits, and sharing those profits with shareholders.
For example, as of Aug. 23, 2024, the S&P 500 has gained 97.91% in the past five years -- even after the pandemic, the 2022 stock market decline, and other short-term bad news and noise in the economy. Your No. 1 goal as a stock market investor should be to not miss out on those long-term gains.
Don't try to time the market by deciding that you think "today" or "next month" is the best time to buy stocks. Don't panic and sell all your stocks after a one-day decline. Picking individual stocks can be fun, and might even help you make money in the short term -- but it can also be risky, by putting too many of your eggs in one company's basket.
Most long-term retirement investors are likely to do better with broadly diversified, low-cost index fund ETFs like the S&P 500 index.
Bottom line
Long-term retirement investors shouldn't worry about today's stock market moves. Just make sure your 401(k), IRA, or brokerage account is well-diversified in an appropriate mix of stocks and bond assets for your age, target retirement date, and risk tolerance.
Whether the stock market is a bull, bear, or buffalo, you can keep your retirement savings strong by sticking with a long-term investment plan, owning a diversified mix of index funds, and trying not to get distracted by short-term noise.
Alert: highest cash back card we've seen now has 0% intro APR until nearly 2026
This credit card is not just good – it's so exceptional that our experts use it personally. It features a 0% intro APR for 15 months, a cash back rate of up to 5%, and all somehow for no annual fee!
Click here to read our full review for free and apply in just 2 minutes.
We're firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers. The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.Bank of America is an advertising partner of The Ascent, a Motley Fool company. The Motley Fool has positions in and recommends Bank of America and Target. The Motley Fool has a disclosure policy.
