If you have started taking interest in the stock market, then you must have heard many new words, one of them is Bull Market and Bear Market.
You must have heard it in newspapers or on news channels. The words bull and bear don’t need any explanation but the term does, so in today’s post, we will understand the terms “Bull Market and Bear Market” (in the world of the stock market), when and where the words bull market and bear market are used and what do these words mean in the stock market.
What are Bull Market and Bear Market?
Bull Market and Bear Market
A bull market is the financial condition of the market that reflects investor confidence, optimism, and positive expectations.
A bull market is generally related to the stock market, but it applies to all financial markets such as currencies, brands, commodities, etc. During a bull market, everything in the economy moves surprisingly upwards, such as rising GDP, job growth, rising stock prices, etc.
Simply put, bull markets often lead to the overvaluation of stocks because investors are overly optimistic and believe that the stock will always go up.
The opposite of a bull market is a bear market, which usually refers to a poor economy, fewer jobs, recession, and a drop in share prices. Investor behavior during bearish markets tends to be highly pessimistic. Because they fear the stock will go down and down.
Bear markets make it difficult for investors to choose profitable stocks for the short term.
The funny thing is that “Bull” means Bull and “Bear” means Bear. The words Bull and Bear that are used in the market are derived from the way these animals attack their opponents. A bull swings its horns up in the air, while a bear swings its paws down. These actions are metaphorical for the movement of a market. If the trend is upward, it is a bull market. And, if the trend is down, it is a bear market.
Examples of Bull Market and Bear Market
India’s Bombay Stock Exchange Index (BSE) was in the bull market for almost five years from April 2003 to January 2008, as it rose from the 2,900 mark to the 21,000 mark.
Examples of bear markets in India are the stock market crashes of 1992 and 1994 and the dotcom crashes of 2000.
Also, the Great Depression of the 1930s is a famous example of a bear market in America.
Like all other markets, a bull market or a bear market does not last endlessly because no market can stay the same in one motion forever. Moreover, it is difficult to predict the changing trends in the market as it is heavily influenced by the psychological effects and speculations of the investors.
- A bull market always denotes a rising position of the market and a bear market denotes a falling position of the market where the prices of most of the shares in the market started declining.
- Some investors in the market prefer the bear market and get benefits from doing short selling in the bear market, but most of the investors in the stock market support the bull market. And if the history of the stock market over the last few years is seen, then you will see that the market is bullish (increasing).
- A bear market is considered fatal for investing because during this time there is a lot of fluctuation in the prices of the shares.
Above, we have understood what is a bull market and what is a bear market, and in what situation these words are used in the share market. We hope that you guys have liked this post. And these words must have been helpful in your share market journey.
See you in the next post with similar technical topics.