Bear vs bull market: How to tell the difference

In simple terms, when the market trend is rising, it’s bull market, whereas if there is a fall, its a bear market. The bull market is defined as a marketplace, wherein the prices of the securities go up or are anticipated to go up, over the period. This type of market encourages buying, as the conditions are favourable.

Prevailing interest rates

This is largely due to investors actively pumping more and more funds into the market. That, coupled with increased trading activity and investing in stocks, gold, real estate, etc., results in a bull market. During a bullish market, you will see substantial economic growth. On the contrary, the economy in a bearish market will either fall or not grow at all.

Economic Growth

A good economy can drive investments in the stock market, which in turn can boost the economy. Investors use animal names to refer to the dominant characteristic of financial markets and the opinions that investors hold about them. Probably the two best known examples of this are bull versus bear markets.

bear vs. bull market

Mt. Gox — an exchange that once accounted for more than 70% of all BTC transactions — was created in 2010. However, the exchange was hacked in 2011 — an event that bdswiss review seemed to mark the end of the bull market. The hack highlighted the fact that at this point, investors did not have an easy and reliable way to buy Bitcoin.

Is it better to buy stocks in a bull or bear market?

In bull vs bear market history, the first recorded use of the term ‘bull’ to describe the stock market was made on the London Stock Exchange (LSE) in 1769. ‘Bear’ was first used eight years later in 1787, also on the LSE. The ebb and flow of buying and selling keeps the market from becoming so expensive the regular person couldn’t afford to trade. Sometimes a correction can be seen as the start of a bear market which is not the case. That can affect your trading hence the need to know the bear market definition. In a bullish market,  we see much liquidity flowing into the market.

  1. Investor sentiment can sometimes help to gauge when the market’s mood is about to change.
  2. Because the market’s behavior is impacted and determined by how individuals perceive and react to its behavior, investor psychology and sentiment affect whether the market will rise or fall.
  3. Bull and bear markets occur over a sustained period; over time, the bulls have prevailed as the stock market has posted positive results.
  4. He joined Ventura Securities Limited in 2005 as head of mutual fund products distribution and has been Director at the company since 2008.
  5. The 2017 bull run is commonly cited as the time when Bitcoin finally broke through to the mainstream.

Most of the time, investors lose their confidence and exit in the bear market itself by booking losses. But there is a caveat involved; selecting a stock based only on its price during a bear phase, without checking the fundamentals of the company, can be misleading. Bear stock markets can be trickier, as it’s hard to say which companies may survive and bounce back with new profits and which may not.

There are eight key differences in knowing the difference between a bull and bear market. The main thing to remember is that an overall general sense of optimism characterizes a bull market. And it’s this optimism that tends to catalyze greed, resulting in positive growth.

But, during a bearish market, we typically see the interest rate increase to curb the use of money. Perhaps the most notable instance of a bull market in stocks is between 1990 and 2000. Stock prices rose to a whopping 417%, with just a correction exceeding ten percentage points. Investor appetite for securities increases, leading to a surge in stock prices when supply shrinks. This may happen even before the broader economic indicators, such as GDP, grow. They also coincide with different phases of the macroeconomic cycle.

A bear market is a downward trend in financial markets, indicating a weakening economy and a loss of investor confidence. Generally, a market is considered a bear market when prices have declined more than 20%. Bear markets can be as short as a few weeks or as long as a several years. A bull market, aka a bull run, is an extended period of time when stock prices increase (usually a 20% increase) compared to its most recent low. As the market shows signs of continuous growth, investors become more optimistic and buy more shares.

“You absolutely do not buy breakouts during a bear market,” O’Neil wrote. Dollar-cost averaging (DCA) is one of those terms that’s thrown around a lot by investors. Over time, some of your investments might perform well, and others, not so much. If you let it go, you could end up with too many investments in a particular asset class or company. However, on June 1, 2023, the US Senate voted to pass the Fiscal Responsibility Act, which would suspend the debt ceiling through January 2025, and restrict 2024 and 2025 budgets. Financial experts fear that this bill would increase investment volatility and cause a downward spiral in the overall market.

Since 1932, the average length of a bull market has remained just under five years. Because there are many differences between bull and bear markets, the way you make investment decisions varies greatly. Having a higher allocation of stocks is optimal in a bull market, where there’s more potential for higher returns. One way to capitalize on the rising prices of a bull market is to buy stocks early on and sell them before they reach their peak. In a bear market, where there is more loss potential, investing in equities should be done with great prudence, since you are likely to incur a loss — at least initially. In preparation for a bear market, it may be wise to direct your money toward fixed-income securities.

Investing in a bull market can be exciting because of the potential for increased profit. At some point, things can slow down or even dip – that’s when a market correction occurs. However, both the S&P 500 and the Nasdaq 100 made new highs by August 2020.

So, why is a bull market considered a positive sign and a bear market a bad omen for investors? Maybe it’s because bulls are known to charge wildly to get where they want. Bears can charge, too, but they tend to destroy things, eating, rummaging and generally causing more damage than bulls. The difference between a bear market and a bull market is the direction of prices and the general success or health of the market. Simply put, it’s a bull market when prices are going up, and it’s a bear market when prices are going down. More specifically, however, a bear market describes any stock index or individual stock that drops 20% or more from its recent highs.

But if investors are getting nervous because of bad news or shaky economic signals, that could mean a bear market is on its way. You’ll notice it when stocks start to drop more often, and other investors are expressing their preference to save rather than invest. History shows us that bear markets have durations ranging from a couple of months to a few years, but they have historically turned around.

During the ’90s, technology (especially the internet) was booming big time. Because of that, people were super confident and started investing more money into the stock market, expecting profits. Most recently, the Dow Jones Industrial Average went into a bear market on March 11, 2020, and the S&P 500 entered a bear market on March 12, 2020. This followed the longest bull market on record for the index, which started in March 2009.

Leave a Comment

Your email address will not be published. Required fields are marked *

Select Service*
Weekend Studio Booking with Equipment
Weekend Studio Booking without Equipment
Weekday Studio Booking with Equipment
Weekday Studio Booking without Equipment
Total: $
Phone Number*
Total: $
Scroll to Top