Bear or Bull? What do These Market Terms Mean?

Bear vs. Bull, what are they?

“Bear” and “Bull” are used to describe market trends. You will often hear the term “bear-market” or “bull-market”. They are used to describe how the market is moving-up or down. They really describe how investors are feeling about the market, because that is ultimately what dictates the market’s movement.

Bear

A bear market is used to describe a market that is trending downwards. Prices are dropping and investors think they will continue to drop. A bear market can signify a slowing of the economy.

Bull

A bull market is the opposite of a bear market; it is one that is trending upwards. The economy is doing well, share prices are rising and investors think they will continue to trend upwards.

Why these terms?

I was taught that the terms “bear” and “bull” were chosen based on how the animal attacks. If you picture a bear attacking, it is swipes down with it’s paws. A bull does the opposite, it thrusts it’s horns up into it’s opponent. The market is a different animal after all. Long ago, humans would force these two animals would fight against each other for sport, making them logical opposites.

Additionally, it is rumored that bear skin traders were the first recorded short sellers- selling their asset before they had it. They would benefit if the price went down, so “bear” came to mean expecting or hoping for prices to go down.

What should I do?

This is an impossible question to answer because it depends on what your personal investment goals are (and not everyone has the same definition of bear/bull markets)

Generally in a bear market, you expect prices to keep falling, so therefore it’d be advisable to start short selling. Also, people tend to rebalance their portfolio with safer investments in bear markets.

In a bull market, an investor is likely to see higher returns, especially with risker portfolios. Ideally you’d want to buy at the beginning of a bull run and sell at the peak – many investors will tell you not to time the market, it’s improbable if not impossible for it to work.

 

*Per all my entries, I am not a certified financial planner and my advise is merely my opinion.

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