Bull Vs Bear Market: Heres What They Mean And How Investors Can Profit Investor’s Business Daily

bulls vs bears definition

In a bearish trend there could be signs of bullish phases and vice versa. In the Graph 1 given below, the factors that have led to the bull and bear phases in the last 22 years from January 2000 till May 2022 have been highlighted. At the beginning of the period from Jan 2000 till May 2003 https://www.bigshotrading.info/ and after that from September 2010 till September 2013, the markets did not show any trend. It is observed that bull phases last longer than bear phases, over a long-term trend. Over 22 years, there have been five instances of bullish trend as compared to three instances of bearish trends.

bulls vs bears definition

But a bear market doesn’t always indicate that a recession is coming. In recent history, a recession has followed a bear market about 70% of the time. Bull markets generally take place when the economy is strengthening or when it is already strong. They tend to happen in line with strong gross domestic product (GDP) and a drop in unemployment and will often coincide with a rise in corporate profits. Investor confidence will also tend to climb throughout a bull market period. The overall demand for stocks will be positive, along with the overall tone of the market.

Advantages of a Bull Market

This type of selling was used by many people involved in an early eighteenth-century scandal in England known as the South Sea Bubble. It’s not uncommon for analysts and observers to call a “bull market” when prices rise 20% or more from a previous low. However, there are many definitions of a bull market, with some saying one cannot be confirmed until the previous high has been taken out.

That’s why financial advisors recommend you revisit your portfolio many times over your life to adjust your portfolio allocation and to rebalance as needed. That may mean buying or selling different securities to maintain an appropriate mix of stocks, bonds and cash to meet your financial objectives and risk tolerance level. If you’re approaching the end of your investment timeline (a.k.a. you’re bulls vs bears definition a few years away from your target retirement date), you have less time to recover from bear market dips. While we know the market historically has recovered from each bear market, you may not have the average two years for your investments to return to their previous values. Another factor that determines whether the market is bull or bear is how the economy changes from time to time.

Bull Vs. Bear Market: Here’s What They Mean And How You Can Profit

Stock prices are informed by future expectations of profits and the ability of firms to generate cash flows. A strong production economy, high employment, and rising GDP all suggest profits will continue to grow, and this is reflected in rising stock prices. Low interest rates and low corporate tax rates also are positive for corporate profitability. Since bull markets are difficult to predict, analysts can typically only recognize this phenomenon after it has happened. A notable bull market in recent history was the period between 2003 and 2007.

One of the worst bear markets in U.S. history was precipitated by the stock market crash of 1929, which led to the Great Depression and lasted almost three years. Whether you’re bullish or bearish on animal metaphors, the bull and the bear are ingrained in the way we discuss the ups and downs of the market. There are no definitive answers about the origins of these market terms, but this article explores how bulls and bears came to battle it out in the language of finance. The December drop worried analysts that a full-fledged bear market is on the horizon. Sixty-five percent of institutional investors believe that the bull market will end this year, according to a Natixis survey.

What is a Bull and a Bear Market?

It’s impossible to know exactly when a bull market will start, but one way for investors to prepare for the next one is to keep buying high-quality stocks, even when they are falling. But this lousy performance might be considered “bearish” over a much shorter period, such as one quarter. The longest bear market took place shortly after the dot-com bubble, lasting from 2000 to 2002. A very loose definition of a bull market – in other words, a market that is viewed as being on the rise more generally – is one that has risen by more than 20% from its most recent low.

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