What is Bull and Bear market?
In the investing world, the terms “bull” and “bear” are frequently used to describe market conditions. These terms are used to describe how stock markets are doing in general—that is, whether they are appreciating or depreciating in value. And as an investor, the direction of the market is a major force that has a huge impact on your portfolio. So, it’s important to understand how each of these market conditions may impact traders investments.
A bull market is a market that is on the rise and where the economy is sound; while a bear market exists in an economy that is receding, where most stocks are declining in value. Although some investors can be “bearish,” the majority of investors are typically “bullish.”
The stock market, as a whole, has tended to post positive returns over long time horizons. A bear market can be more dangerous to invest in, as many equities lose value and prices become volatile. Since it is hard to time a market bottom, investors may withdraw their money from a bear market and sit on cash until the trend reverses, further sending prices lower.
Bull Market vs. Bear Market
A bull market is a market that is on the rise and where the conditions of the economy are generally favorable. Meanwhile, a bear market exists in an economy that is receding and where most stocks are declining in value. Because the financial markets are greatly influenced by investors attitudes, these terms also denote how investors feel about the market and the ensuing economic trends.
A bull market is typified by a sustained increase in prices. In the case of equity markets, a bull market denotes a rise in the prices of companies shares. In such times, investors often have faith that the uptrend will continue over the long term. In this scenario, the country’s economy is typically strong and employment levels are high.
By contrast, a bear market is one that is in decline. A market is usually not considered a true “bear” market unless it has fallen 20% or more from recent highs. In a bear market, share prices are continuously dropping. This results in a downward trend that investors believe will continue; this belief, in turn, perpetuates the downward spiral. During a bear market, the economy slows down and unemployment rises as companies begin laying off workers.