Bear and Bull Markets in Canada: How to Behave in Each

Bull markets are characterised by economic optimism, strong earnings, and rising participation. The TSX has experienced extended bull runs — the post-2009 recovery lasted over a decade, and Canadian investors who stayed in broad ETFs saw exceptional returns.

Bear markets are shorter but feel more intense. Historically they last about 9-12 months on average. The TSX, like global markets, has recovered from every bear market in its history — including 2008, 2020, and 2022.

The most costly mistake for Canadians is panic-selling during a bear market — converting paper losses into real ones and missing the recovery. This is especially painful inside a TFSA: if you sell $50,000 of ETFs that were purchased for $30,000, you lose $20,000 in contribution room until the following January.

The practical wisdom: bull markets reward patience, bear markets reward discipline. Dollar-cost averaging is particularly powerful in bear markets, as your regular TFSA and RRSP contributions buy more ETF units at depressed prices — positioning you for outsized gains during the recovery.

For Canadian FIRE-focused investors, sequence of returns risk — experiencing a bear market early in retirement — is a critical planning consideration. Having 2-3 years of expenses in cash or GICs provides a buffer so you do not need to sell equities at depressed prices.